Buyer
Johnson & Johnson
Johnson & Johnson (J&J) is the world’s largest and most diversified healthcare products company. Unlike other companies, J&J had more cash on hand during the Covid-19 pandemic due to the development of their vaccine, which benefitted from this situation. (NYSE: JNJ)
Target
Abiomed
Abiomed is a world-leading heart, lung, and kidney support technology player. It has an 18-year record of yielding relatively profitable growth. They are esteemed for their Impella® heart pump and other ground-breaking medical technology. (NASDAQ: ABMD)
The total deal value is $16.6Bn
The deal was announced on the 1st of November; it is yet to be completed, but it has been finalised.
Abiomed's stock rose by 52.21%, however, J&J stock fell by 0.51%, but J&J still regards the transaction as accretive.
Deal Details and Other Information 🤝
- J&J is set to purchase Abiomed through an outstanding shares offer for an upfront payment of $380.00 per share in cash, consisting of a $16.6 billion deal.
- The deal will be debt-financed, suggesting that deal-making is still pertinent in the US regardless of current geopolitical issues.
- Abiomed shareholders are bound to be rewarded with $35 per share in cash if specific KPIs are hit.
- J&J added that the acquisition would be accretive
- Accretive Definition: Pro-forma EPS of combined post-merger > original EPS
- Dilution Definition: Pro-forma EPS < the acquirer’s pre-merger EPS
- Both these terms are not exclusively negative or positive. However, corporates pay attention to Pro-forma EPS because of consequent market reactions.
Wait, what is the difference between a merger and an acquisition?
- Merger: combination occurs between similarly sized companies. The transaction is usually financed with stock, resulting in companies operating under one combined name.
- Acquisition: the target is usually a smaller company than the acquiring buyer. Unlike a merger, the target company’s name will either:
- Vanish and be integrated into the buyer’s company or,
- Operate under its old name
Share Price Changes post-deal announcement: 📈📉
Public Sentiment: Industry-leading technology and happy shareholders 🤑
- Increased diversification for J&J’s portfolio – this transaction will vastly benefit MedTech (owned by J&J) to boost revenue and outreach further.
- J&J can expand their market opportunities through Abiomed’s customer base.
- J&J predicts the deal to be mainly accretive, and their stock price is “only going up from here.”
- Abiomed will operate as an independent firm, keeping its branding as if it “weren’t acquired” but will still be a part of the J&J family.
- Abiomed shareholders were rewarded with a 52.21% yield on their investments.
- It will operate as a subsidiary to keep its branding, customer outreach, credibility, and recognisability so that J&J can leverage these aspects to profit and improve sales.
- Public sentiment could be harmed from a cross-selling point of view, as consumers could quickly be sold goods from J&J as a “package deal”.
- Customers usually do not want to be cross-sold because of how companies can take advantage of their presence in the market.
- J&J might cross-sell the wrong product, disrupting B2C relationships.
- Overall, this acquisition is extremely beneficial to the cardiovascular development industry as J&J will be able to support Abiomed’s research through its immense wealth and resources.
