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J&J in $1.3B Inverness buy
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May 23, 2001: 1:33 p.m. ET
Health care company to acquire diabetes care business for $1.3 billion in stock
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NEW YORK (CNNfn) - Johnson & Johnson agreed Wednesday to acquire the diabetes care business of Inverness Medical Technology for $1.3 billion in stock.
Terms of the deal call for Inverness shareholders to receive Johnson & Johnson stock valued at $35 a share, plus a common stock interest in the new company, for each Inverness share. The $35 price tag represents a less than 1 percent premium to Inverness closing share price Tuesday of $34.95.
The boards of both companies have approved the transaction, which is expected to close in Johnson & Johnson's fourth quarter. The purchase still needs endorsement from Inverness shareholders as well as regulatory approval.
New Brunswick, N.J.-based Johnson & Johnson announced earlier this month that it was in talks with Inverness to buy certain businesses. Johnson & Johnson (JNJ: down $0.58 to $98.42, Research, Estimates), which makes consumer products such as Tylenol and Band-Aid bandages, also capped a $10.5 billion stock purchase of drug maker Alza Corp. in March.
Waltham, Mass.-based Inverness (IMA: up $1.45 to $36.40, Research, Estimates) develops and markets products for diabetes self-management, as well as a line of women's health products.
As part of the deal, Inverness will spin off its non-diabetes businesses, which include women's health products, nutritional supplements and clinical diagnostics, to form a new publicly traded company owned by Inverness shareholders.
The purchase includes Inverness's electrochemical blood glucose meter and strip business as well as LXN Corp. and Integ. The net value of the diabetes care products business is about $1.3 billion, Johnson & Johnson said, which also markets Inverness' diabetes products.
The Inverness businesses will join Johnson & Johnson's Lifescan franchise, which makes blood glucose monitoring systems for home and hospital use.
"Inverness has a very strong near-term pipeline of blood glucose meters and test strips; and a promising long-term pipeline of emerging new technologies," said Johnson & Johnson Vice Chairman James Lenehan.
The health care products maker plans to take a one time charge in 2001 of about $100 million, or 7 cents a share, related to the write-off of in-process research and development. The purchase will also dilute earnings per share by 2 cents in 2001 and 2002 but will add to earnings thereafter, Johnson & Johnson said in a statement. 
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