The Work

April 27, 2011 1:50 PM

Cravath, Shearman Lead in J&J's $21 Billion Deal for Synthes

Posted by Tom Huddleston Jr.

Just a few weeks after speculation started about a potential deal, Johnson & Johnson has agreed to acquire orthopedic devices manufacturer Synthes, Inc., in a $21.3 billion deal that would rank as the pharmaceuticals and health care products giant's largest deal to date.

The agreement, which was announced on Wednesday, calls for New Brunswick, N.J.-based J&J to pay 159 Swiss Francs ($181.30) per share for Synthes, which is based in West Chester, Pa., but is listed on the Swiss exchange. The cash and stock offer would break down to $63 per each Synthes share in cash and $117.09 in J&J common stock. The New York Times notes that the bid represents a 22 percent premium over Synthes's closing price on April 14, the day before reports of a potential deal surfaced.

Cravath, Swaine & Moore is advising J&J on the transaction, led by corporate partner Robert Townsend. The New York-based Townsend has represented the company on a number of deals in the past, including J&J's recent $2.4 billion takeover of the remaining shares of Dutch vaccine maker Crucell. He also led a team from Cravath last month that advised J&J subsidiary Janssen Pharmaceutica NV on its acquisition by Eli Lilly and Company.

Cravath corporate partner Damien Zoubek worked with Townsend on this deal, as did compensation and benefits partner Eric Hilfers and tax partner Andrew Needham. Assistant general counsel James Bergin was the in-house deal lawyer for J&J. Russell Deyo is the company's general counsel.

Weil, Gotshal & Manges partners Steven Newborn, Ann Malester, and Steven Bernstein are providing J&J with antitrust counsel, along with counsel John Sipple, Jr.

Meanwhile, Shearman & Sterling handled the lead role in advising Synthes. M&A partners Christa D'Alimonte (New York) and Creighton Condon (London) took the reins for Shearman, which also advised Synthes on its 2007 acquisition of San Diego company N Spine, Inc., in a deal worth roughly $75 million.

Other Shearman lawyers on this deal include litigation partners Paula Howell Anderson and Alan Goudiss; tax partners Larry Bambino and Doug McFadyen; compensation and benefits partner John Cannon; intellectual property transactions partner Sam Waxman; antitrust partner Dale Collins and antitrust counsel Lisl Dunlop.

Sullivan & Cromwell, led by New York M&A partner Stephen Kotran, represented Goldman, Sachs & Co., J&J's financial adviser.

The deal, which is expected to close during the first half of 2012, is still subject to approval from Synthes shareholders, as well as regulators in the U.S. and Europe. Synthes's founder and chairman, Hansj√∂rg Wyss, has already agreed to vote shares representing no less than 33 percent of the company's stock in favor of the deal, according to the companies' announcement.  

Upon completion of the transaction, J&J would fold Synthes into its orthopedics unit, DePuy Companies, which would then become the company's largest medical devices business.

The agreement comes less than a month after the finalization of another huge health sector consolidation, as Sanofi-Aventis and Genzyme agreed on a $20 billion deal after talks dragged on for months

Bloomberg noted that J&J is looking to benefit from Synthes's strong financials in the $37 billion orthopedics market after dealing with more than 50 drug and device recalls since the beginning of 2010. According to Bloomberg, Synthes has increased its annual net income for seven straight years and boasts an operating margin of 35 percent. 

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