J&J to buy Synthes for $21.3B

Johnson & Johnson is buying Switzerland's Synthes for $21.3 billion in cash and stock. Upon the completion of the transaction, Synthes and the DePuy Companies will comprise the largest business within the Medical Devices and Diagnostics segment of J&J, according to a statement. The deal is expected to close during the first half of 2012.

Synthes, which had confirmed earlier this month 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.

"It's a pretty fair price," said Lisa Bedell Clive, an analyst at Sanford C. Bernstein, as quoted by the New York Times. "For J&J it's a great deal. Trauma is one of the few med-tech markets where they haven't had a top-three business." Buying Synthes would be J&J's biggest acquisition, giving it a leading position in equipment to treat trauma, Reuters noted earlier this month.

"Orthopaedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson," explains J&J Chairman and CEO Bill Weldon in a statement. "Synthes is widely respected for its innovative high-quality products, world-class R&D capabilities, its commitment to education, the highest standards of service and extensive global footprint."

Analysts at Zuercher Kantonalbank had expressed surprise at the deal, AFP reports, noting that Wyss in the past had been reluctant to let go. "The price is towards the lower end of the range," they said in a note to investors.

However, analysts are also anticipating that antitrust regulators will be taking a close look at the deal. "Antitrust authorities look at this on a product line by product line basis," Clive said, as quoted by the NYT. "It could happen that they'll let this go untouched."

Despite the enthusiasm, the terms of the deal have left investors confused--and Synthes stocks haven't really moved, NASDAQ notes. Under the terms of the agreement, J&J would give Synthes investors CHF55.65 (roughly $63) in cash per Synthes stock and not more than 1.9672 or not fewer than 1.7098 shares of J&J, should the shares of the U.S. company lie within a range of CHF52.54 ($59.76) and CHF60.45 ($68.76).

"Given this deal structure as understood by the market right now, an investor can only be sure that he will get the cash component of this deal for 100%. But what is going to happen if J&J's shares slide or if the dollar is continuing its current slide against the Swiss franc," the Zurich-based trader said, as quoted by Dow Jones. "Had the phrasing of the deal been clear, the share price of Synthes should have traded close to the suggested offer price."

- check out the J&J/Synthes release
- see the AFP story
- get more from MarketWatch
- check out the NYT piece
- see the Dow Jones piece

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