J&J confirms $23.1bn bid for Synthes

Elizabeth Fournier
JOHNSON & Johnson (J&J) yesterday confirmed a $23.1bn takeover bid for Swiss group Synthes, in a deal that will create the world’s largest orthopaedic devices producer.

The agreed price values Synthes at SwFr159 (£109.3) per share, with payment in a mixture of cash and shares. The price is a premium of 8.5 per cent to Synthes close yesterday on the Swiss exchange.

“It is surprising the deal has been struck between cash and shares. The market consensus, and our view, was it would be all cash, so the quality of the take-out is slightly lower than we anticipated,” said Morgan Stanley analyst Michael Jungling.

The acquisition is J&J’s biggest ever, giving it a leading position in equipment to treat trauma.

Synthes, which posted sales of $3.7bn in 2010, makes nails, screws and plates to fix broken bones, as well as artificial spine discs.

The deal hinged on the agreement of Hansjörg Wyss, the Swiss entrepeneur who founded Synthes in 1974. Analysts doubted that Wyss, who will leave the company under the terms of the merger, would be willing to concede control to J&J.

Wyss holds a 40 per cent stake in the company, plus an additional eight per cent through family trusts.

Shares in rival orthopaedic group Smith & Nephew (S&N) fell 4.4 per cent on the news to their lowest level in three months, before recovering slightly to close 1.7 per cent down at 658.5p.

S&N rejected a £7bn approach from J&J late last year, and shares in the artificial hip maker hit a record high in January amid continuing speculation, despite a denial that it was in ongoing takeover or merger talks.