J&J: Don’t Stop Dealmaking Now
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It has been a long and tortured courtship. For years, health-care giant Johnson & Johnson (JNJ ) has held on-again, off-again acquisition talks with medical-device maker Guidant (GDT ). Now Wall Street sources say the companies are talking again. While a deal is far from assured, it appears J&J and Guidant are closer than they’ve ever been to linking up. Even if J&J pulls off the Guidant deal, don’t expect the company to put its checkbook away for long. Certainly, Guidant would be a good acquisition for the $47 billion J&J, giving it a big piece of the fast-growing market for implantable defibrillators, which correct overly rapid heartbeats and help stave off cardiac arrest. And the deal — which analysts figure would be valued at about $25 billion — could give a boost to slowing revenue growth over the next few years. JOLT FROM MEDICAL DEVICES. But New Brunswick (N.J.)-based J&J could face a slowdown again later in the decade. The culprit: Its large pharmaceutical business, which, like the rest of the drug industry, is facing patent expirations, intensifying competition, and a dearth of new products. That’s why Johnson & Johnson needs to continue hunting for deals — and why Chairman and Chief Executive William C. Weldon wants to bulk up in the medical-device business, which has been on a tear of late. J&J already garners 36% of its sales from its devices and diagnostic testing business, a sector that enjoys healthy margins and the potential for lucrative new products in the years ahead. More : businessweek.com |