Synthes confirms 'combination' talks with J&J

The existence of talks aimed at a possible merger of Johnson & Johnson and Synthes was confirmed Monday by Synthes, which has major operations in Chester County.

Synthes is a global manufacturer of medical devices with headquarters in Switzerland and West Chester and four facilities in West Chester and one in Paoli.

The company is one of the dominant players in the field of repairing bones, especially in the spine and those broken by trauma. That means plates and screws, compounds, and medical power tools.

"In response to market speculation, Synthes Inc. confirms that it is engaged in discussions with Johnson & Johnson about a potential business combination transaction," Synthes said in a statement posted on its website Monday. "No assurance can be given as to whether, when or on what terms any possible transaction might occur. Synthes does not intend to make any further public statements unless and until a definitive agreement has been reached, or until discussions between the parties have terminated."

Johnson & Johnson spokesman Bill Price declined to comment on the Synthes statement.

The Wall Street Journal reported Friday evening that the two companies were in preliminary talks and suggested a deal could be worth $20 billion.

Stock markets were roiled Monday with news that Standard & Poor's had cut its outlook on the U.S. debt to negative, but Johnson & Johnson shares were nearly unchanged, finishing the day at $60.46, down 10 cents.

Synthes is traded on the Swiss stock exchange in part because it was founded by four Swiss surgeons in 1958. The stock climbed 7.8 Swiss francs to 146.50, which equates to $163.40. Synthes chairman Hansjorg Wyss is 154th on Forbes' list of the world's billionaires at $6.4 billion, second on the Swiss billionaire list. He reportedly owns 40 percent of Synthes, so he might move up the billionaire rankings if the deal goes through.

Johnson & Johnson, which is scheduled to report first-quarter earnings Tuesday, already has a medical-device division, but adding Synthes would strengthen the spine-trauma portion of its business. J&J also reportedly had nearly $28 billion in cash and short-term notes, so some investors were eager to know where the company would spend that money.

J&J has juggled a string of problems in other divisions. Its McNeil Consumer Healthcare division, which has plants in Fort Washington and Lancaster, has had several recalls, and the Fort Washington plant has ceased production while fixes are made under a consent decree with the U.S. Food and Drug Administration. Last week, J&J settled a dispute with the Securities and Exchange Commission for $70 million after the company was accused of bribing doctors in several Eastern European countries.

Synthes, meanwhile, is having to divest its subsidiary Norian because that company and four local executives pleaded guilty to charges involving illegal market tests of bone cement on humans. The U.S. Attorney's Office in Philadelphia, which helped prosecute the case, said in court filings that three people died on the operating table.