EC launches in-depth probe of J&J's Synthes takeover - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
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EC launches in-depth probe of J&J's Synthes takeover

by Renee Cordes  |  Published November 4, 2011 at 8:57 AM
synthes227x128.jpgThe European Commission on Friday, Nov. 4, launched an in-depth probe into Johnson & Johnson's $21.3 billion acquisition of orthopedic device maker Synthes Inc. amid "serious doubts" over the deal's impact on competition.

"The proposed acquisition would remove a competitor from some markets which are already concentrated," Joaquín Almunia, the EU's competition commissioner, said in a statement.

He added: "The Commission needs to make sure that effective competition is preserved, in order to maintain innovation and prevent harm to patients."

In their initial investigation, case workers found that the proposed transaction would combine two of the leading suppliers of spinal devices, and would strengthen Synthes' position as the current market leader in devices used to treat trauma and facial and skull fractures.

They also found it would strengthen Johnson & Johnson's role as market leader in shoulder devices in several European countries.

"At this stage of the investigation, the Commission has concerns that the remaining competitors in many of the markets may not be able to exert a sufficiently strong restraint on the behavior of the merged entity," the EU executive said in a statement.

Regulators are worried that the removal of an important competitor in various markets may hurt innovation and reduce choice for patients, potentially leading to price increases. "Consequently, at this stage, the acquisition raises serious doubts as to its impact on competition," the Commission noted.

The preliminary deadline for the probe is March 19. Phase two investigations generally last 90 working days unless extended.

Friday's move brings to three the number of in-depth probes on the Brussels regulator's books, all involving U.S. companies.

The watchdog is due to rule on Western Digital Corp.'s $4.3 billion swoop on Hitachi Ltd.'s hard-drive disk business by Nov. 30, and on Deutsche Börse AG's $9 bilion tie-up with NYSE Euronext by Dec. 22, though it will likely extend the latter deadline to 2012 to study remedies expected from the merging companies later this month.

Although the Commission clears the vast majority of mergers following a one-month review, it is obliged to launch a so-called Phase 2 review if it has concerns.

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Tags: European Commission | Johnson & Johnson | medical devices | Synthes Inc.

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Renee Cordes

Correspondent: Brussels



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