J&J offers EU concessions for $21.3 bn takeover of medical device firm Synthes

23 Feb 2012

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US healthcare group Johnson & Johnson (J&J) has offered concessions to the European regulator in order to gain its approval for its $21.3-billion proposed acquisition of Swiss medical device maker Synthes Inc.

The European Commission (EC) yesterday said J&J has offered concessions for its proposed acquisition of Synthes, without elaborating what concessions were offered by J&J.

In April 2011 J&J, the world's second-largest seller of health products after Pfizer, had agreed to buy Synthes, in a cash-and-stock deal worth around 21.3 billion (19 billion Swiss francs) (See: J&J to buy Swiss medical devices maker Synthes for $21.3 billion)

Synthes will be the biggest acquisition in the New Brunswick, New Jersey-based company's 125-year history.

After extending its deadline by 10 working days to assess the concessions, the Brussels-based 27-country European Union regulator said it would decide by 26 April whether to approve the deal or not.

Synthes, which reported 2010 sales of $3.7 billion, manufactures artificial spine discs and also makes nails, screws and plates for orthopaedics.

The acquisition will give J&J a leading position in the $5.5 billion trauma treatment market, and upon completion of the deal, the healthcare giant plans to combine Synthes and its own DePuy Companies to form a larger medical devices and diagnostics segment with the group.

The EC may have asked the New York-based company to divest some of its trauma assets to win regulatory approval, say analysts.

In November 2011, the EC expanded its review of the deal, after its initial investigation revealed that the transaction may trigger an increase in prices for orthopedic medical devices.

Joaquin Almunia, the EC's antitrust commissioner had said at the time, ''The proposed acquisition would remove a competitor from some markets which are already concentrated.''

J&J rivals in the trauma sector include Stryker and Zimmer.

''This could reduce innovation and choice for patients, triggering ''potentially an increase in prices for the orthopedic medical devices concerned,'' Almunia added.

J&J and Synthes, based in Switzerland with US headquarters in East Goshen, Pennsylvania did not comment on the EC statement.

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