J & J to Buy Mentor
Johnson & Johnson said Monday it would buy Mentor, a maker of cosmetic products and breast implants, for $1.07 billion, a move that would help the drug maker become a major player in cosmetic and reconstructive surgery.
Analysts said Johnson & Johnson was paying “a giant premium” for Mentor, which makes MemoryGel breast implants, liposuction equipment and skin repair products.
Under the deal, Johnson & Johnson will start a cash tender offer for $31 a share — nearly double Mentor’s Friday closing price of $16.15. The drug company will also assume Mentor’s debt, about $50 million, and make the company a stand-alone unit in its Ethicon business, a top provider of sutures, mesh and other surgical products. Mentor, based in Santa Barbara, Calif., has about 1,300 employees and had $373 million in 2007 sales.
Mentor shares jumped $14.43 on Monday, or 89 percent, to $30.58 in afternoon trading; J.& J. shares, weighed down by a big decline in the broader market, fell $3.25, or 5.5 percent, to $55.33.
“It’s a good space for J.& J. to get bigger in because it’s a space with the least cost-control pricing pressures,” as patients, rather than insurers or government health programs, generally pay for cosmetic surgery, said Erik Gordon, associate dean and head of biomedical industry programs at Stevens Institute of Technology.
Johnson & Johnson this summer introduced a collagen-based skin filler called Evolence. Some products made by Ethicon are being used in plastic surgery, including sutures, mesh implants for facelifts, and harmonic scalpels, said Bill Price, a spokesman for the company.
The deal is expected to reduce Johnson & Johnson’s 2009 earnings by 3 to 5 cents a share and is scheduled to close during the first quarter. Mentor’s chief executive, Joshua H. Levine, will stay on as a member of Ethicon’s global management board, Mr. Price said. Significant layoffs are not expected.
Mentor’s main competitor in the breast implant market is Allergan, the maker of Botox. Mentor is developing its own anti-wrinkle injection and dermal fillers to compete.
On Nov. 24, Johnson & Johnson bought Omrix Biopharmaceuticals, a biotech company, for $438 million. The deal is expected to close this month.
Mr. Gordon said he expected more acquisitions — by J.& J. and by pharmaceutical companies that have too weak a pipeline to support their overhead and need to either acquire products or merge with another large company and slash costs.
Over all, portions of the health care sector with cash-heavy balance sheets, like big drug makers, have been more open to acquisitions during the current recession.
source: http://www.nytimes.com/2008/12/02/business/02drug.html?ref=health
