Trading on Johnson & Johnson's $21.3 Billion Purchase of Synthes

Includes: BSX, IHI, JNJ, MDT, TMO
by: Benzinga

By Daniel James Hayden IV

New Brunswick, New Jersey-based Johnson & Johnson (NYSE:JNJ) and Synthes Inc. announced early on Wednesday that the two companies had reached an agreement for Johnson & Johnson to buy the Swiss company for 159 Swiss francs per share, or a total of U.S. $21.3 billion at current exchange rates.

Synthes will join Johnson & Johnson's DePuy Companies to form the largest business within Johnson & Johnson's Medical Devices and Diagnostics segment.

The companies said that together they would be better able to address market trends that include an aging population, growing demand in emerging markets and more patients with joint diseases caused by increasing obesity rates.

Johnson & Johnson (JNJ) Chairman and Chief Executive Officer Bill Weldon said, "Orthopaedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson. Synthes is widely respected for its innovative high-quality products, world-class R&D capabilities, its commitment to education, the highest standards of service, and extensive global footprint."

Synthes President and Chief Executive Officer Michel Orsinger said, "Synthes and Johnson & Johnson are both respected as global leaders, sharing the mission of delivering the highest possible standard of patient care and also have very similar company cultures. The combination presents a significant opportunity to jointly bring our products, services and educational offerings to the next level. Together, we will be a more attractive and exciting company for our employees, and a more resourceful partner for our customers."

Johnson & Johnson will finance just over one third of the transaction with cash and the remainder of the financing with its common stock.

The companies said that their boards of directors have already approved the deal and that they expect for the transaction to close during the first half of 2012, after receiving shareholder and regulatory approval.

If the Johnson & Johnson's acquisition of Synthes leads to other deals in the medical device sector, companies like Medtronic Inc. (NYSE:MDT), Boston Scientific Corporation (NYSE:BSX) and Thermo Fisher Scientific, Inc. (NYSE:TMO) could see their share prices climb higher.

Investors who want exposure to this sector but would prefer a more diversified investment should take a look at the iShares Dow Jones U.S. Medical Device (NYSEARCA:IHI) ETF.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.