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FTC likely to approve J&J-Synthes deal

by William McConnell in Washington | Published May 30, 2012 at 4:14 PM

The Federal Trade Commission is expected to approve Johnson & Johnson's $21.3 billion purchase of Swiss-American orthopedic devices maker Synthes Inc. as early as Friday, June 1, which would complete a nearly yearlong review of the deal and possibly allow J&J to close its largest-ever acquisition next week, according to arbitrageurs tracking the deal.

The FTC's five members are believed to be reviewing the divestiture package approved by the European Commission last month that calls for J&J to divest the trauma device unit of its DePuy Orthopaedics Inc. subsidiary to private equity-backed Biomet Inc. for $280 million. The FTC has already cleared Biomet to acquire the DePuy unit.

The Synthes deal is the largest ever conducted by J&J, no small feat given that J&J has relied to a large extent on acquisitions for its growth. Synthes is the world's dominant player in trauma devices.

During the EC's four-month review, the Commission found that the combined entity would have such a high market share for trauma devices in several European Union countries that a substantial remedy would be needed to clear the deal.

Although J&J officials had originally predicted that no divestitures would be needed, the prospect of an extended review before the EC prompted the company to make the Biomet deal in early April.

Soon after the deal was announced, J&J tried to head off what would become a lengthy review by temporarily withdrawing its merger notification to the FTC. Pulling and refiling a merger application with antitrust officials is a common tactic when companies hope to avoid a more cumbersome second request for information from regulators. Under U.S. law, antirust officials must issue a second request or clear a merger within 30 days of receiving an initial merger notification.

Closing the Synthes deal, which is also contingent upon closing the Biomet deal, would be delayed at least a couple days after FTC approval because the price of the Biomet transaction will be based on the price of Synthes stock two days before that deal closes.

J&J has been represented before the FTC by a Weil, Gotshal & Manges LLP team led by partners Ann Malester, Steven Newborn and Steven Bernstein. Synthes has been represented by Freshfields Bruckhaus Deringer LLP partner Frank Montag.

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FTC likely to approve J&J-Synthes deal

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