ABIOMED Inc (NASDAQ: ABMD) opened about 50% up on Tuesday after Johnson & Johnson (NYSE: JNJ) said it will buy the heart pump maker for $16.6 billion.
ABIOMED stock shot up in line with the proposed premium
J&J is willing to pay $380 a share for the medical devices company – just over a 50% premium on its previous close. ABIOMED shareholders could also get another $35 a share in cash as long as certain milestones (commercial and clinical) are achieved.
The stock market news arrives at a time when Johnson & Johnson is in the middle of separating its consumer health business to focus more on pharmaceuticals and medical devices. According to Joaquin Duato – the Chief Executive of J&J:
Addition of ABIOMED provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.
Last month, Johnson & Johnson reported strong results for its fiscal Q3 despite fears of a recession. Its shares are trading down this morning.
ABIOMED to be accretive to JNJ’s earnings from 2024
Johnson & Johnson expects this transaction to complete in the first quarter of 2023. The acquisition, it projected, will be accretive to adjusted earnings in 2024 and beyond. In the press release, CEO Duato added:
We have committed to enhancing our position in MedTech by entering high-growth segments. The addition of ABIOMED is an important step in the execution of our strategic priorities and our vision.
The Nasdaq-listed firm, as per J&J, will continue as a standalone business following the merger that is yet to secure regulatory approval and satisfy other customary closing conditions.
It’s the biggest deal that Johnson & Johnson has signed in close to six years – funding for which will come from cash on hand and short-term financing. Nonetheless, J&J is convinced that its balance sheet will remain strong enough to maintain dividends and stock buybacks.