Time To Look At J&J? Synthes Confirms Merger Talks (JNJ)

Johnson & Johnson

is in talks to

for approximately $20 billion, after the Swiss medical device maker confirmed the talks. If J&J were able to acquire Synthes for around $20 billion, it would be a fairly cheap deal, as it would only be approximately a 9% premium to Friday's closing price of Synthes, which some are saying it's too low. "In response to market speculation, Synthes Inc confirms that it is engaged in discussions with Johnson & Johnson about a potential business combination transaction," Synthes said in a statement. JP Morgan discussed the deal in a

and said that a deal for Synthes made sense financially for J&J. "At the reported purchase price of $20 billion, we estimate a Synthes acquisition would be 3-4 percent accretive to J&J's 2012 GAAP earnings per share," the analysts said in a note. A deal for Synthes could potentially be very beneficial for J&J shareholders, as the deal would be accretive next year, and would give them greater access to the fast growing medical device sector. Shares are not down that much at all in pre-market trading, down less than 1%. If you believe that the deal for Synthes makes sense after reading what J.P. Morgan has to say and doing your own research, then buying shares of J&J at these levels potentially makes sense. Shares are very cheap, trading around 12 times earnings, and sport a 3.6% dividend yield to boot. You could do a lot worse than invest in Johnson & Johnson. Just ask Warren Buffett.