Cravath helps J&J implant Mentor, Omrix

On Dec. 1, Johnson & Johnson announced it has agreed to buy breast implants maker Mentor Corp. for $1.07 billion in cash, or $1.12 billion including debt. The $31-per-share purchase price represents a 92% premium to Mentor's close on the Friday before the deal's announcement.

The transaction grew out of New Brunswick, N.J.-based J&J's sponsorship of the Summer Olympics in Beijing, where the company's executives realized how much opportunity existed for cosmetic products in Asia. Flying back from the games in August, J&J executives stopped over at Santa Barbara, Calif.-based Mentor to meet its CEO, Joshua Levine, and chairman, Joseph Whitters, and to explore a deal. In addition to silicone implants, Mentor sells liposuction products and has a Botox rival in its pipeline.

Agreeing on a valuation was a challenge, given the market's volatility. But "J&J realized the long-term value of the business. They kept their eyes on the prize, rather than focus on the vagaries of the market," says the source. To reach consensus, the companies and their financial advisers -- J&J opted to go only with its in-house development team -- looked at precedent transactions and ran various models, such as sensitivity analysis for 18 months out and 24 months out, assuming sustained economic headwinds.

Mentor's financial advisers were Citigroup Inc.'s Vikram Bhardwaj, Wes Walraven, Ralph Watts and Ben Carpenter. Bhardwaj's and Watts' relationship with Mentor stemmed from their time serving First Health Group Corp. in its purchase by Coventry Health Care Inc. for $1.8 billion in 2004. Whitters was then an executive at First Health. He joined Mentor's board in 2004. The Citi duo advised Mentor on its 2005 failed run for Medicis Pharmaceutical Corp., a Scottsdale, Ariz., drugmaker, and on its 2006 sale of its urology unit to Danish healthcare products maker Coloplast A/S for $463 million.

For legal advice, Mentor tapped Morrison & Foerster LLP, which has been counseling the breast implant maker on Securities and Exchange Commission compliance and corporate governance issues since 2006. The MoFo team was led by Scott Stanton, joined by Steve Rowles, Mike O'Bryan, Mike Frank, Joseph Fletcher, Steve Smith, Jon Gowdy, Mika Mayer and Kathy Johnstone. MoFo is no stranger to breast implant deals: Stanton led a team that represented Inamed Corp. in its $3.2 billion acquisition by Allergan Inc., in 2005.

J&J went with Cravath, Swaine & Moore LLP, with Damien Zoubek on corporate matters, Eric Hilfers on executive compensation and Gregory Battista on environmental issues.

Johnson & Johnson also bagged an Israeli healthcare company in recent weeks. On Nov. 24, J&J said it would buy Omrix Biopharmaceuticals Inc., a provider of biosurgical sealants for bleeding prevention, for $438 million in cash. As with the Mentor deal, the pharma giant tapped its in-house development team for the M&A work. Cravath, Swaine & Moore LLP also worked on the deal, along with Jones Day and Weil, Gotshal & Manges LLP.

At Cravath, Eric Hilfers provided advice on executive compensation, while Gregory Battista assisted on environmental issues -- roles they would reprise on the Mentor deal. Robert Townsend III and Eric Schiele led the corporate effort. Townsend served on the deal teams for J&J's failed Guidant Corp. bid as well as its successful bid to buy Pfizer Inc.'s consumer healthcare division.

The team at Weil, which served as special antitrust counsel to J&J, was led by Steven Newborn, co-head of its global antitrust/competition practice, with partner Lee Van Voorhis and counsel John Sipple also on board.

Omrix, which is based in New York but manufactures in Israel, turned to David Fox, Kathy Bristor and Randall Doud of Skadden, Arps, Slate, Meagher & Flom LLP for legal counsel. Skadden's New York-based Fox, who received his LL.B. from Hebrew University in Jerusalem, is a member of both the New York and Israeli bar. UBS advised Omrix.