J&J to Buy Synthes for $21.3 Billion

This is going to be a busy day for the market. After the close, we’re going to get earnings reports from AFLAC ($AFL) and Fiserv ($FISV). Also, the Federal Reserve will be wrapping up its meeting and Ben Bernanke will hold the Fed’s first-ever news conference.

Also, it’s now official: Johnson & Johnson ($JNJ) is going to buy Synthes for $21.3 billion.

Johnson & Johnson will buy Synthes for 159 Swiss francs per share — that’s 103.35 Swiss francs in JNJ stock and 55.65 francs in cash. Considering the size of J&J’s cash balance, I would have preferred they had used as much cash as possible.

The deal still needs to be approved:

It’s unclear whether Synthes’s public shareholders, many of whom now are aggressive hedge-fund traders who move in once a company is in play, will be satisfied with the price J&J is offering for market growth. Many have argued privately in recent days that Synthes is worth at least 165 francs a share.

If completed, the Synthes purchase would be J&J’s largest acquisition to date. In 2006, it bought Pfizer Inc.’s consumer health-care business for $16.6 billion. Since then, the company, which has nearly $28 billion in cash and securities, has typically eschewed large deals in favor of a “string of pearls” approach, shelling out as much as a few billion dollars for companies. At the same time, J&J aims for dominant positions in its main markets of consumer products, pharmaceuticals and medical devices and diagnostics.

Posted by on April 27th, 2011 at 9:10 am


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