J&J may buy Synthes in $20-bn deal
16 April 2011
United States-based healthcare and consumer products maker Johnson & Johnson is in talks to buy Synthes, a Swiss-American medical equipment manufacturer, in a deal that could be worth $20 billion, according to several unconfirmed reports.
How far the talks have progressed is not clear; The Wall Street Journal suggests they are still at a nascent stage and could well fall apart. But if the deal goes through it would be one of the biggest healthcare takeovers in recent years and the largest ever by Johnson & Johnson.
Synthes, which is based in West Chester, Pa. but is listed on the Swiss stock exchange, is a big manufacturer of implants to repair bone fractures, as well as surgical power tools. North America accounts for roughly 60 per cent of the company's revenue.
Its largest shareholder is its chairman Hansjörg Wyss, who with his family owns about 47.8 per cent of the company.
A 1965 graduate of Harvard Business School who joined Synthes in 1977, Wyss is the second-wealthiest person in Switzerland, with Forbes estimating his net worth at about $6 billion. He donated $125 million to Harvard University in 2008, the biggest single gift in the history of the school.
The WSJ points out that Johnson & Johnson has long been set to strike a big deal. It has a relatively low amount of debt, as well as $28 billion in cash and short-term investments and $14 billion in annual free cash flow.
Johnson & Johnson has struck about six deals worth more than $1 billion since 1998. Its largest takeover to date was its $16.6-billion purchase of Pfizer's consumer health care division in 2006. That same year, the company lost a bidding war for Guidant, a maker of stents and pacemakers, to Boston Scientific, which ultimately paid nearly $27 billion.
In late December, Johnson & Johnson bid $2.4 billion for the shares in Crucell, a Dutch biotechnology company.
Though perhaps best known for its consumer health products like shampoo, Johnson & Johnson has increasingly shifted to medical devices, which was its biggest source of sales last year at $24.6 billion. Among the division's existing offerings are knee and hip replacements, as well as endoscopy and sterilisation products and Acuvue contact lenses.