Johnson & Johnson is in preliminary talks to buy Synthes for roughly $20 billion, the Wall Street Journal reported Friday. Synthes, which confirmed Monday it was in takeover talks with J&J, specializes in the development, manufacturing and marketing of instruments, implants and biomaterials for the surgical fixation, correction and regeneration of the human skeleton and its soft tissues.
Buying Synthes would be J&J's biggest acquisition, Reuters noted, giving it a leading position in equipment to treat trauma. However, a spokesman for J&J declined to comment on the development.
"J&J has developed a strong war chest of cash. They have the ability to do a deal like this from a size and strategy standpoint," Morningstar analyst Damien Conover said, as quoted by Reuters. "This is an area where J&J would like to build strength."
And Analysts at JP Morgan said an acquisition of Synthes made sense financially for J&J, a Reuters update noted. "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.
However, one banker wondered whether the deal made sense for J&J. "There's other companies it would fit better with. J&J has been looking at acquisitions for a while. It's odd that they settled on this target. I'm not sure the deal gets done," the banker said, as quoted by Reuters.
As Matthew Herper notes, Hansjorg Wyss, Synthes' chairman, would be worth an extra $1.5 billion since Forbes last valued him in March, when he was worth $6.4 billion. The Wall Street Journal's Deal Journal reported Wyss is the second-richest person in Switzerland, and the 154th-richest person in the world, according to Forbes.