Zurich: Synthes said on Monday it was in takeover discussions with Johnson & Johnson, after reports the US group looking to buy the Swiss medical device maker for a price that could be about $20 billion.
A source familiar with the situation told Reuters at the weekend the two sides were in preliminary talks but no deal was assured.
A deal at $20 billion would mark an 11% premium over Synthes’ current market capitalisation of about $18 billion and allow healthcare conglomerate J&J to further diversify its healthcare business.
“In response to market speculation, Synthes Inc confirms that it is engaged in discussions with Johnson & Johnson about a potential business combination transaction,” Synthes said in a statement.
“No assurance can be given as to whether, when or on what terms any possible transaction might occur. Synthes does not intend to make any further public statements unless and until a definitive agreement has been reached, or until discussions between the parties have terminated,” the group said.
Buying Synthes would be J&J’s biggest acquisition and would help the cash-rich US healthcare conglomerate further diversify its business by giving it a leading position in equipment to treat broken bones and trauma.
Synthes makes nails, screws and plates to fix broken bones as well as artificial spine discs.
So far this year, its shares have risen 9.8%, outperforming a near 1% fall in the European health care sector index.
The medical device sector has been consolidating as pharmaceutical companies look to diversify away from drugs going off patent.
Other recent medical device deals include the $5.8 billion acquisition of Beckman Coulter by Danaher Corp, announced in February.
There had previously been speculation that J&J, which had cash and short-term investments of $27.7 billion at the end of 2010 and will report results on April 19, was interested in buying British orthopaedics company Smith & Nephew.
Medical devices and diagnostics accounted for 40% of J&J’s $61.6 billion in 2010 sales but the business has been hit by competition and recalls in its hip and knee replacement unit.
J&J owns around 250 separate companies under its corporate umbrella. The group attempted to acquire US medical device maker Guidant several years ago, but was outbid by Boston Scientific Corp.
The deal would be the latest in a string of international mergers in the healthcare sector, which recently saw France’s Sanofi Aventis acquire U.S. biotech company Genzyme and Canada’s Valeant Pharmaceuticals International make a hostile bid for Cephalon Inc.