Johnson & Johnson, one of the world's biggest makers of medical devices, said it will purchase Abiomed Inc. for about $17.3 billion, building on its portfolio of technology to assist heart function.
J&J will pay $380 a share in cash, according to a statement Tuesday. That represents a premium of about 50% over Abiomed's closing price Monday and is close to the stock's 52-week high in November 2021. Abiomed shareholders will also receive as much as $35 a share in additional cash if certain goals are achieved, according to the companies.
J&J is planning to spin off its consumer unit next year, and is looking to focus on higher returns from its pharmaceutical and medical technology divisions. Abiomed makes almost all of its money through the sale of Impella heart pumps -- small devices that are threaded through arteries into the heart to help it move blood through the body.
Abiomed shares rose 51% to $380.50 in early trading on the news. J&J fell 1.1%.
In general, Impella devices are used when a patient's heart isn't pumping enough blood to oxygenate the body, to increase the rate of blood flow, or for a patient undergoing a high-risk heart surgery, to help the heart function during the procedure.
Abiomed has a "monopoly position in mechanical circulatory support, an extensive product pipeline, and was expected to return to mid-teens revenue growth in the outyears" as a stand-alone company, said Marie Thibault, an analyst at BTIG, in a note Tuesday.
The Abiomed purchase the first big deal for J&J's Joaquin Duato, who took over as the company's CEO in January. He's been at the company for roughly three decades and was the architect behind the company's breakup. In an interview with Bloomberg earlier this year, Duato said that J&J must put more resources into developing medical technologies of the future.
Abiomed had $937 million in cash and zero debt as of the end of September. Its sale price to J&J corresponds to an enterprise cash value of about $16.6 billion, the companies said. The transaction will take place through a tender offer and is expected to be completed by the end of March.
If Abiomed accepts a superior offer or the merger agreement is terminated, the company would need to pay J&J $550 million, according to a filing. It's unlikely another acquirer will surface given the premium J&J is paying, Thibault said.
JPMorgan Chase & Co. served as financial adviser to J&J, with Cravath Swaine & Moore as legal counsel. The Goldman Sachs Group and Sullivan & Cromwell represented Abiomed.
Danvers, Mass.-based Abiomed said Tuesday its second-quarter revenue rose 11% on a constant-currency basis to $266 million, with some of its biggest sales gains coming in the Japanese market.
Information for this article was contributed by Ike Swetlitz of Bloomberg News (WPNS).