EU OKs J&J $21B Buy Of Synthes, Pending Sale of DePuy Orthopaedics

on April 19 2012 10:34 AM
A banner featuring a Euro coin is seen on the European Commission headquarters building. The European Commission approved J&J's purchase of Synthes Inc. on Thursday.
A banner featuring a Euro coin is seen on the European Commission headquarters building. The European Commission approved J&J's purchase of Synthes Inc. on Thursday. REUTERS

Johnson & Johnson secured approval for its $21.3 billion purchase of Synthes Inc. from the European Commission on Thursday, following an agreement to sell its DePuy Orthopaedics Inc. Trauma division to allay antitrust concerns.

The European Commission determined that once New Brunswick, N.J.-based J&J sold its trauma division, there would still be sufficient market competitiveness if the company bought Synthes.

This was the first time the Commission examined these product markets. We obtained remedies to ensure that competition will remain strong in these markets, for the ultimate benefit of patients and social security systems, Commission Vice President Joaquín Almunia said in a statement.

J&J plans to divest its DePuy Orthopaedics Inc. Trauma division, according to Bloomberg.

The commission determined that J&J's proposed purchase of Westchester, Pa.-based Synthes, which develops and produces implants and biomaterials for the surgical fixation, correction and regeneration of the skeleton and soft tissues, would not impede competition for the spine and shoulder replacement and cranio-maxillofacial devices or surgical tools markets. However, there was concern that J&J's acquisition would impede market competition in the trauma devices market, the commission's statement said.

The European Commission based its concerns over the combined high market share of J&J and Synthes in the trauma devices market, particularly because of the strong market position of the AO Foundation, a Swiss-based organization with an exclusive deal with Synthes. The relationship between Synthes and the AO Foundation would have made it unlikely for surgeons to switch to a different supplier, according to the Commission.

J&J promised the commission it will sell its entire European trauma business to ensure that the Synthes deal received regulatory approval.

The Commission's investigation confirmed that, subject to the divestment of Johnson & Johnson's trauma business, the merged entity would continue to face competition from a number of other strong competitors and that customers would still have sufficient alternative suppliers in all of the markets concerned, the Commission's statement said.

The planned acquisition of Synthes by J&J was brought to the commission in September 2011.

Johnson & Johnson stock was down 0.35 percent to $63.02 Thursday morning.

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