Johnson & Johnson, Synthes announce merger agreement

Johnson & Johnson announced the acquisition of Synthes, Inc. in a $21.3 billion agreement that will create the largest business within the medical devices and diagnostics segment of Johnson & Johnson.

According to a press release, under the terms of the agreement each share of Synthes common stock will be exchanged for CHF55.65 in cash and CHF103.35 in Johnson & Johnson common stock. The transaction reportedly has an estimated net acquisition cost of $19.3 billion as of the close of business on April 26, based on Synthes’ approximately 119.5 million fully diluted shares outstanding and approximately $2 billion in cash on hand as of signing.

“Synthes and Johnson & Johnson are both respected as global leaders, sharing the mission of delivering the highest possible standard of patient care and also have very similar company cultures,” stated Michel Osringer, president and chief executive officer of Synthes, in the release. “The combination presents a significant opportunity to jointly bring our products, services and educational offerings to the next level. Together, we will be a more attractive and exciting company for our employees, and a more resourceful partner for our customers.”

The transaction is reportedly expected to close during the first half of 2012, with previously issued guidance for adjusted earnings per share remaining unaffected.

Additionally, the release noted, the transaction is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act, approval by the European Commission and regulatory approval in certain other jurisdictions — as well as other customary closing conditions. It will also require the approval of Synthes’ stockholders, and will be effected by way of a statutory merger under Delaware law.

Addressing market trends

Synthes and DePuy noted in the release that the merger places them in position to address significant market trends, such as an aging population, patient desire to remain active, increasing rates of obesity and the resulting impact on joint disease, growing treatment demands in emerging markets, and a movement toward earlier intervention.

“DePuy and Synthes together will create the most innovative and comprehensive orthopedics business in the world and enable us to better serve clinicians and patients worldwide,” stated Bill Weldon, chairman and chief executive officer of Johnson & Johnson, in the release. “Orthopedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson. 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.”

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