Johnson & Johnson Now Expects Synthes Deal to Boost Profit
Johnson & Johnson said it expects to complete its $19.7 billion purchase of Swiss medical device maker Synthes on Thursday and that the deal will slightly boost company profit this year, rather than being a moderate drag on earnings as previously expected.
U.S.-based J&J said late on Monday that the cash and stock deal, the largest in the company's history and which will give it a line of profitable tools and materials used in trauma surgery, should boost 2012 earnings by 3 to 5 cents a share.
The company said it had previously calculated the acquisition would hurt earnings by 22 cents per share, based on 2010 financial information.
"This represents an upside surprise relative to prior guidance," Wells Fargo analyst Larry Biegelsen wrote in a research note.
"Confusion over details of the financing may be sending the stock off a bit," said Piper Jaffray analyst Matt Miksic, who predicted shares could reclaim some lost ground on Tuesday.
Miksic said J&J disclosed it would use a greater amount of the company's overseas cash, from its Irish-based drug affiliate Janssen Pharmaceutical, to help finance the deal - a move he believes would have favorable tax implications.
In addition, Janssen will buy about 204 million shares of J&J common stock for an initial price of $12.9 billion, J&J said. Company shares, along with cash, will be allocated to Synthes shareholders to satisfy terms of the deal.
Industry analysts, on average, had expected J&J's full-year earnings to rise about 2% this year to $5.12 per share, according to Thomson Reuters I/B/E/S.
J&J, which sells a wide array of medical devices, said it plans to take after-tax charges related to the Synthes purchase of $1.1 billion for the remainder of 2012, including restructuring and integration costs.
The company expects the acquisition to boost 2013 earnings, excluding special items, by 10 cents to 15 cents per share.
J&J officials declined to comment further on the transaction, pending its completion.
