J&J seals $30b Actelion deal in push for rare disease lead

US giant to begin tender offer to buy shares of Swiss drugmaker for $280 each in cash

Johnson & Johnson agreed to buy Actelion Ltd for $30 billion (Dh110.1 billion) and spin off the Swiss drugmaker’s research and development operations, clinching its largest deal ever to become a leader in medicines for a rare type of high blood pressure.

J&J, which is funding the transaction with the cash it holds outside the US, will fulfil its goal of gaining a new drug category and see its earnings get an immediate boost from the transaction. The deal is expensive compared to recent industry takeovers such as Pfizer’s acquisition of Medivation Inc. and AbbVie’s purchase of Pharmacyclics, according to an analysis from Bloomberg Intelligence.

The agreement caps two months of stuttering negotiations to find a deal structure palatable to Jean-Paul and Martine Clozel, Actelion’s founders. The discussions were interrupted for several days after New Brunswick, New Jersey-based J&J Johnson & Johnson’s agreed takeover of Actelion for $30 billion in cash marks the biggest takeover with a European pharma business as target since Sanofi-Synthelabo acquired rival Aventis 13 years ago to forge what is now Sanofi.

The following table lists the 10 largest previous mergers or takeovers with a European pharma business as target, based on Thomson Reuters Deals Intelligence data.

Target

SmithKline Beecham

Target value

$78.78b walked away on December 13, only to return to the negotiating table about a week later, interrupting talks Clozel had started holding with France’s Sanofi.

J&J will begin a tender offer to buy shares of Allschwil, Switzerland-based Actelion for $280 each in cash, the companies said in a statement. The price, which

Acquirer

Glaxo Wellcome equals 280.08 Swiss francs, is 23 per cent above Wednesday’s closing level. The research and development operations will be spun off to Actelion shareholders as a new publicly traded company with 1 billion francs of cash. J&J will keep a 16 per cent stake in the new company.

J&J is paying more than 21

Deal clinched on (incl net debt)

01/17/00 01/26/04 12/09/98 03/07/96 03/23/06 04/22/14 times Actelion’s estimated 2020 earnings per share, more than double what AbbVie spent on its cancer biotech, which “shows how hard it is to find an asset that actually makes a difference in your earnings,” said Sam Fazeli, an analyst for Bloomberg Intelligence in London.

It’s possible that the new US administration could present an obstacle to using overseas cash to fund the deal, Fazeli said.

J&J held $38.2 billion in cash and equivalent securities through its foreign subsidiaries as of January 3, 2016. Repatriating all of the funds to the US could have tax implications, the drugmaker said at that time.

The Actelion deal comes just as US President Donald Trump begins to offer details on his plans to create jobs and persuade US companies to keep their operations in the US since taking over on January 20.

Earnings boost

Access to Actelion’s drugs Tracleer, Opsumit and Uptravi, which all treat life-threatening pulmonary arterial hypertension, will make J&J a leader in treating the disease and help it expand beyond autoimmune, heart and cancer drugs.

The new deal will immediately start adding to J&J’s earnings when the transaction in completed by the end of the second quarter, the companies said. The US behemoth expects the transaction to boost its long-term profit growth by as much as 2 per cent over analysts’ expectations.