Johnson & Johnson
) is all set to complete its acquisition of Synthes, Inc. on June
14, 2012. The company, which received Federal Trade Commission
(FTC) approval recently, will be acquiring Synthes for a total
purchase price of approximately $19.7 billion in cash and
For each share of Synthes, the shareholder will be entitled to
receive CHF 55.65 in cash and 1.7170 shares of Johnson &
Johnson common stock.
Antitrust approval from the European Commission was granted on
April 19, 2012. Meanwhile, the FTC asked Johnson & Johnson to
sell its system for treating distal radius wrist fractures. Johnson
& Johnson said that it will be selling its entire trauma
portfolio, including DVR, to Biomet. The sale is scheduled to go
through later this month.
Johnson & Johnson announced that its wholly owned Irish
subsidiary, Janssen Pharmaceutical, has signed a $12.9 billion
accelerated share repurchase (ASR) programs with two investment
bankers. The shares purchased under the ASR agreements, along with
cash on hand from Janssen Pharmaceutical, will be used towards the
purchase consideration for the Synthes deal.
With the company announcing the share buyback program and the
financial structure for the deal, Johnson & Johnson now expects
the Synthes acquisition to be accretive to earnings instead of
dilutive as expected earlier. Earlier, the company had said that it
expects the deal to be dilutive by 22 cents per share in 2012.
However, with the financial structure in place, the company now
expects the acquisition to boost 2012 adjusted earnings by 3-5
cents per share. Meanwhile, 2013 earnings are expected to be
boosted by 10-15 cents per share due to the acquisition.
Johnson & Johnson expects to incur charges of $1.1 billion
in 2012 related to the acquisition. We expect to get more details
when the company reports second quarter results on July 17, 2012.
At that time, we believe the company will update its 2012 earnings
guidance of $5.07 - $5.17 per share. The Zacks Consensus Estimate
for 2012 and 2013 is $5.11 and $5.43 per share, respectively.
Through the Synthes acquisition, Johnson & Johnson is
looking to strengthen its medical device portfolio. The products of
both companies should complement each other.
Synthes has a strong global footprint with manufacturing
facilities in the US, Europe and China and a solid pipeline of new
products and technologies. Synthes' global sales came in at $3.97
billion in 2011, with US sales coming in at $2.14 billion.
We currently have a Neutral recommendation on Johnson &
Johnson, which carries a Zacks #3 Rank (short-term Hold
JOHNSON & JOHNS (JNJ): Free Stock Analysis
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