J&J to wrap up Synthes deal

Posted: June 14, 2012

Johnson & Johnson said Tuesday evening that it plans to complete the largest acquisition in the company's 126-year history on Thursday, taking over medical device maker Synthes Inc., for about $19.7 billion in cash and stock.

J&J is based in New Brunswick, N.J., and has operations around the globe, including in the Philadelphia region. Synthes has headquarters in Switzerland and in West Chester.

The previously announced tentative price of $21.3 billion was subject to currency and stock prices at the time of closing.

This acquisition was announced almost 13 months ago, but the last regulatory hurdle was cleared Monday, when the U.S. Federal Trade Commission approved the deal, pending J&J's sale of wrist devices to Biomet. J&J previously said it would sell all of its DePuy trauma devices to Biomet to satisfy regulators.

Originally formed by four Swiss orthopedic surgeons, Synthes became the market leader in plates, rods, screws, and nails to fix broken bones. The company had nearly $4 billion in sales in 2011 and has nearly 12,000 employees worldwide and several facilities in Chester County.

The plan is to merge the branches of Synthes with the remaining pieces of DePuy to form a powerful device business.

Synthes' board chairman, Hansjorg Wyss, who built the U.S. operation and was chief executive officer for 30 years, is the largest single shareholder in the company. Wyss, his daughter Amy and family-controlled trusts own nearly 50 percent of company stock, according to financial documents.

Synthes is registered in Delaware but is traded on the Swiss stock exchange. As such, Synthes shareholders will be paid in J&J stock and Swiss francs, based on a formula that includes the average price of J&J stock. Based on a Thursday closing date, each outstanding share of Synthes common stock will be converted into the right to receive 55.65 Swiss francs ($57.95 as of Tuesday) and 1.7170 shares of J&J stock. J&J shares closed at $63.08, up 96 cents.

To finance the transaction, without incurring any new debt, J&J said, it is using its Janssen Pharmaceuticals subsidiary to immediately buy $12.9 billion in J&J stock through Goldman Sachs and J.P. Morgan, with the investment banks planning to buy shares on the open market over the next 12 months to repay the lenders.

Contact David Sell at 215-854-4506 or dsell@phillynews.com or @PhillyPharma on Twitter. Read his PhillyPharma blog on philly.com.

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