Johnson & Johnson’s Synthes Acquisition Could Get The Stock Moving

+20.16%
Upside
150
Market
180
Trefis
JNJ: Johnson & Johnson logo
JNJ
Johnson & Johnson

Johnson & Johnson (NYSE:JNJ) has received much awaited FTC approval to complete the acquisition of Swiss medical device maker Synthes. However, the approval is contingent on a condition that JNJ will sale its subsidiary DePuy orthopaedics to Biomet. [1]. The $19.7 billion acquisition could trigger an upside for the company’s stock, which recently has been grappling with a host of lawsuits related to the Medical Devices and Diagnostics franchise.

We have a price estimate for JNJ at $74, implying a premium of nearly 15% to the current market price. We will soon be updating our model to reflect the acquisition.

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Synthes acquisition to help boost growth

Synthes has a wide portfolio of medical devices for orthopedics market including trauma and spine. The combined JNJ/Synthes orthopedic division would have the broadest orthopedic portfolio globally. We believe that the acquisition will lend support to the company’s efforts to tap growth opportunities in the orthopedics market. JNJ expects the trauma and knee markets to grow 7% and believes spine could rebound to a 5% rate of growth.

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Further, the acquisition will also bring the Synthes’s vast exposure to fast growing emerging countries including China, India and Russia.

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Notes:
  1. Johnson & Johnson Receives U.S. Regulatory Clearance for Synthes Acquisition; Closing Date for Transaction Set, MarketWatch, June 12 2012 []