The Federal Trade Commission has Monday conditionally approved the proposed deal for healthcare giant Johnson & Johnson (JNJ) to acquire medical devices company Synthes, Inc. (SYST.VX), agreed upon in April 2011.
The FTC deemed that the original deal will harm competition in the U.S. market for volar distal radius plating systems. Apart from Johnson & Johnson or J&J, a unit of Synthes also sells a rival volar distal radius plating system.
The proposed deal will lead to the elimination of J&J's only significant U.S. competitor, and the FTC said consumers will then face higher prices or reduced innovation in the future. J&J and Synthes together would have more than 70 percent of the U.S. market for the wrist fracture treatment systems.
Synthes accounted for 42 percent of all U.S. sales for the system in 2010. Meanwhile, J&J acquired its DVR system from Hand Innovations in 2006, accounting for 29 percent of all system sales in 2010.
According to the FTC condition, J&J will be required to divest its system for surgically treating serious wrist fractures, known as DVR, to complete the deal. J&J said it intends to sell DVR, along with the rest of its product line for treating traumatic injuries, to orthopedics company Biomet, Inc., owned by private equity firm TPG Capital.
New Brunswick, New Jersey-based Johnson & Johnson agreed in April 2011 to acquire Synthes for 159 Swiss francs per share in cash and stock or for a total consideration of $21.3 billion. The deal was then expected to close during the first half of 2012.
The deal was also conditionally cleared by the European Commission on April 20, 2012 after J&J agreed to remove competitive concerns regarding the trauma business.
Though the FTC conditions do not require J&J to divest its trauma business, the company agreed to sell the unit also to Biomet, based to the EU conditions the required it to divest its entire trauma business in the European Economic Area.
West Chester, Pennsylvania-based Synthes, which is trading on the Swiss stock exchange, is the leading producer of skeletal treatment devices in North America. It makes compounds, devices and tools to treat several kinds of bone problems.
Upon completion of the deal, Synthes will be combined with J&J's orthopedics business DePuy family of Companies within the medical devices and diagnostics segment of J&J. They will together bring a broader portfolio of orthopedics solutions to more people in developed as well as emerging markets.
The J&J-Synthes deal is one of the biggest health-care takeovers in recent years. In 2006, J&J bought Pfizer Inc.'s (PFE) consumer health unit for $16.6 billion.
JNJ closed Monday's regular trading session at $62.12, down $0.86 or 1.37% on a volume of 12.23 million shares.
On the Swiss exchange, Synthes shares dropped 0.44% and closed Monday's trading at 157.80 Swiss francs.
by RTT Staff Writer
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