£295 / $515 / €370
Through its five product groups – Trauma, Spine, Craniomaxillofacial (CMF), Biomaterials and Power Tools – Synthes Inc develops and manufactures instruments, implants and biomaterials for the surgical fixation, correction and regeneration of the human skeleton and its soft tissues, including both metallic and osteobiological materials. The group also has a Veterinary business.
Synthes is the world leader in traumatology, ranks among the top companies for spinal devices and is in the leading position in the CMF business.
In 2011, Synthes generated revenues of nearly US$4 billion and net earnings of US$966 million. The company employs more than 12,000 people, mainly in the US, Switzerland, Germany, Austria and China. Synthes Inc is registered in Delaware, US. Its holding company, Synthes GmbH, is based in Switzerland.
In April 2011, Synthes entered into a definitive agreement to be acquired by Johnson & Johnson for US$21.3 billion. At the time of the announcement, Synthes’ Board of Directors approved the transaction and Dr Wyss and related parties agreed to vote shares representing not less than 33% of Synthes common stock in support of the transaction.
The acquisition was subject to clearance and an investigation by the European Commission (EC) due to concerns that the merged company would trample all competition in the European orthopaedics market. The EC was notified of the transaction in September 2011 and in November 2011 the EC launched an in-depth investigation. Both Synthes and Johnson & Johnson were advised in a January 2012 Statement of Objections that the merger raised serious concerns and, in absence of sufficient remedy, might be prohibited. The investigation found that the combined entity would have a very high combined market share for trauma devices in several EU countries, due in large to an exclusive relationship between Synthes and the surgeon-led AO Foundation.
In April 2012, the EC ruled, however, that subject to the divestment of Johnson & Johnson’s European trauma business, the merged Synthes/Johnson & Johnson 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. Under the agreement conditions imposed by the EC, Johnson & Johnson entered an agreement to sell DePuy Orthopaedics’ trauma business to Biomet for US$280 million.
The final purchase price Johnson & Johnson to pay for Synthes is expected to be US$21.3 billion, making it the company’s largest acquisition to date. Under the terms of the acquisition, Synthes will be merged with the DePuy franchise, which offers a broad range of products across the orthopaedic and neurological care markets. The combined Synthes/DePuy business will represent the largest component within Johnson & Johnson’s Medical Devices and Diagnostics segment.
The deal has not yet been approved in the US, where the Federal Trade Commission filed a second request for information in August 2011. The transaction is expected to complete in the second quarter of 2012.
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The report was produced as part of Medical Device Companies Analysis (MDCA). For more information on MDCA, click here.