Ending months of speculation, Johnson & Johnson and Actelion have announced a $30 billion merger that will see the latter's R&D unit spun out into a separate business.
After weeks of exclusive talks, the groups have entered into a definitive transaction agreement under which the US healthcare giant will launch an all-cash tender offer in Switzerland to acquire all of the outstanding shares of Actelion for $280 per share.
As per the deal, Actelion will spin out its drug discovery operations and early-stage clinical development assets into a newly created Swiss biopharmaceutical company, to be listed on the SIX Swiss Exchange. J&J will initially hold a 16 percent equity in the new firm and rights to an additional 16 percent through a convertible note, as well as an option on ACT-132577, a Phase II drug in development for resistant hypertension.
Explaining the strategy behind the move, J&J said the addition of Actelion's specialty in-market medicines and late-stage products is consistent with its efforts to grow in attractive and complementary therapeutic areas and serve patients with serious illnesses and significant unmet medical need, with the flexibility to accelerate investment in an industry-leading, innovative pipeline to drive additional growth.
"Adding Actelion's portfolio to our already strong Janssen Pharmaceuticals business is a unique opportunity for us to expand our portfolio with leading, differentiated in-market medicines and promising late-stage products," noted Alex Gorsky, the firm's chairman and chief executive. "We expect to leverage our established global presence and commercial strength to accelerate growth and patient access to these important therapies".
From the other side of the fence, Actelion's chairman of the board Jean Pierre Garnier, who will lead the new R&D firm, says the deal allows shareholders to "monetise their holdings in Actelion at a highly attractive cash price of $280 per share, while at the same time retaining a significant stake in the future potential upside of Actelion's earlier stage pipeline".
"The price is quite high at around 30 times price to estimated 2018 earnings. J&J is paying a lot and R&D is not even included, just a substantial minority stake," one Zurich-based trader was quoted by Reuters as commenting on the transaction. "But it represents only 10 percent of (J&J's) market capitalisation and they are finally investing the cash they hold in Europe".
The transaction, which was unanimously approved by the Boards of Directors of both companies, is expected to be immediately accretive to J&J adjusted earnings per share, and close sometime in the second quarter.