According to the J&J SEC filing, the Synthes board of directors raised the issue of selling the company with board chairman Hansjorg Wyss, the former CEO and the company's largest stockholder, in April of 2010.
The reason was "a backdrop of significant changes to the regulatory, reimbursement, pricing and tax environments driven by health care reform and the weak economic environment that had reduced the growth prospects of Synthes and its industry."
At that point, Synthes and its subsidiary Norian had not yet pleaded guilty to charges that it illegally promoted and conducted a clinical trial of bone cement, during which three people died on operating tables.
Four executives - though not Wyss - were charged, pleaded guilty and await sentencing. By the end of 2010, the company had paid fines, which it said in the filing were approximately $24.3 million.
Synthes board member Amin Khoury and Credit Suisse handled the initial sale solicitations, which began in mid-September.
The nine companies contacted included J&J, whose DePuy subsidiary was a competitor of Synthes in the market for repairing bones with screws and nails, plates and rods, along with the tools for such operations. The SEC filing said four of the nine companies expressed interest.
After an initial meeting, three chose to go forward. On Sept. 24, Synthes and J&J signed a confidentiality agreement that preceded further talks about a possible sale, with J&J offering 145 to 150 Swiss francs per share.
In mid-November, Credit Suisse explored sale talks with six private equity firms. Eventually, three of the six combined on a bid of 151 Swiss francs, but the offer also required Wyss to convert much of his Synthes stake into equity in the post-merger company.
Further negotiations with J&J led to a sale price of 159 Swiss francs, which amounts to about $190 at Friday's exchange rates. J&J will pay 35 percent in cash and 65 percent in J&J stock.
Before the deal was struck, the Synthes board approved pay changes for 16 executives to "incentivize key personnel to remain employed" during the uncertainty of a sale. J&J later wanted those changed.
The filing indicated that as of April 26, 12 of 15 had agreed to changes and two did so shortly thereafter. No word on the amounts involved - or the fate of the last holdout.
Contact staff writer David Sell at 215-854-4506 or dsell@phillynews.com.
