J&J bid lets Actelion have $30 bln cake and eat it

Johnson & Johnson agreed to acquire Actelion Pharmaceuticals on January 26 for approximately $30 billion.

New Brunswick-based health care giant Johnson & Johnson will buy Actelion, a Swiss biotechnology company, for $30 billion in cash, it announced Thursday. The deal was unanimously approved by both boards.

The NewCo will be led by Actelion's current team, including founder and CEO Jean-Paul Clozel, who remains as chief, and Jean Pierre Garnier, current chairman of Actelion, who becomes chair of R&D NewCo. J&J will hold 16% of it with rights to acquire an additional 16%.

Johnson & Johnson said it would acquire all of Actelion's outstanding shares for $280 per share. News of the deal sent Actelion's stock price up 21 percent.

"We believe this transaction offers compelling value to both Johnson & Johnson and Actelion shareholders", Alex Gorsky, the chairman and chief executive of Johnson & Johnson, said in a news release.

Actelion has been the subject of takeover speculation for weeks after J&J launched and then halted discussions with the Swiss company.

But the Actelion deal is negative for J&J's credit because of the steep valuation, and because it depletes cash, Moody's said. That will happen, pending shareholder approval, just prior to the close, which is expected to be in the second quarter of 2017. By using offshore cash to pay for the acquisition, J&J is also taking steps that might lower its future tax bills as Congress eyes an overhaul of the US tax code.

"Adding Actelion's portfolio to our already strong Janssen Pharmaceuticals business is a unique opportunity for us to expand our portfolio with leading, differentiated in-market medicines and promising late-stage products", he said.

"The shares have risen 12.57% since it confirmed exclusive talks with J&J on December 21 but are more than 50% higher since takeover speculation first surfaced in late November", Martin Baccardax reports for TheStreet. Pharmaceuticals is now J&J's biggest unit after consumer brands and medical devices sales dropped in the past two years - and the drug unit needs new areas of growth.

Actelion pioneered the treatment of pulmonary arterial hypertension, or PAH, in 2001 with the introduction of Tracleer, and still dominates the $5 billion global market.

Meanwhile, the transaction deals a blow to Sanofi, which had also courted Actelion.

The spinoff echoes Actelion's own roots: The biotech was itself spun out of Roche Holding AG 20 years ago by a group of scientists there, including Dr. Clozel and his wife Martine, after the Swiss health-care giant decided against pursuing their research. Niederer Kraft & Frey, Wachtell Lipton, Rosen & Katz, and Slaughter & May are legal advisers to Actelion.

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