J&J to Close $19.7 Billion Synthes Deal Thursday
06/12/2012| 07:06pm US/Eastern
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Johnson & Johnson (JNJ) said it expects to close its $19.7 billion bid for medical-device maker Synthes Inc. (SYST.VX) this Thursday, after it received all U.S. and European regulatory clearance for the deal.
J&J said it expected to post $1.1 billion in special charges related to the purchase through 2012, including restructuring and integration costs.
The acquisition is the biggest purchase in Johnson & Johnson's 125-year history, and is part of the health-care company's plan to become the leader in the $5.5 billion market for devices that treat trauma victims. The deal, initially valued at about $21.3 billion, has been expected to close in the first half of this year.
Based on a Thursday closing date, each outstanding share of Synthes, which trades in Switzerland, will be converted into the right to receive 55.65 Swiss francs ($58.27) and 1.717 shares of J&J stock.
The acquisition is expected to benefit 2012 adjusted per-share earnings by three cents to five cents. The company had previously expected the deal to hurt this year's earnings by 22 cents a share, based on 2010 financial information.
For 2013, the first full year of the acquisition, the deal is expected to benefit adjusted per-share earnings by 10 cents to 15 cents.
To finance the deal, the company entered into an accelerated share repurchase agreement with Goldman Sachs Group Inc. (>> Goldman Sachs Group, Inc.) and JPMorgan Chase & Co. (>> JPMorgan Chase & Co.) to purchase 203.7 million shares of its own stock for about $12.9 billion. Those shares, along with cash on hand, will be used to fund the deal. J&J said it doesn't expect to use any debt to fund the deal.
Additional information on the transaction, including full-year earnings guidance, will be reported in its next quarterly earnings conference call, scheduled for July 17, the company said.
Earlier this week, the Federal Trade Commission said it will require J&J to sell its system for surgically treating serious wrist fractures to rival Biomet Inc. as a condition of the deal. DePuy Orthopaedics Inc., a J&J subsidiary, plans to sell the wrist-fracture business, along with the rest of its trauma business, expecting to close the sale in the second quarter.
J&J late last week said it plans to set aside an additional $600 million in its second quarter for potential legal settlements, as it deals with a series of lawsuits over accusations of bribery and improper drug-marketing practices. The company in April said its first-quarter earnings rose on lower expenses and a foreign-exchange-related gain tied to the Synthes deal.
Shares closed Tuesday at $63.08 and were down 28 cents after hours. The stock is down 3.8% so far this year.
Write to Ben Fox Rubin at ben.rubin@dowjones.com
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