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Actelion to be Bought by Johnson & Johnson for $30 Billion, Spin Off R&D Unit

Actelion to be Bought by Johnson & Johnson for $30 Billion, Spin Off R&D Unit
In a $30 billion all-cash deal that includes spinning off Actelion's research and development pipeline, U.S. healthcare giant Johnson & Johnson will buy Swiss biotech company Actelion, the companies said on Thursday.
J&J will be helped in diversification of its drug portfolio as its biggest product, Remicade for arthritis, faces cheaper competition by the acquisition by granting access to the Swiss group's line-up of high-price, high-margin medicines for rare diseases.
The boards of both the companies approved the offer to pay $280 per share, following weeks of exclusive talks.
"The structure is very attractive," said Eleanor Taylor Jolidon, a fund manager at Union Bancaire Privee in Geneva, a top-40 Actelion investor.
Clozel has fended off bids over the years in the belief he could increase Actelion's value by keeping it independent but the price vindicates the strategy of cardiologist Clozel, who co-founded the company with his pediatrician wife Martine and friends in 1997.
"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 said.
"But it represents only 10 percent of (J&J's) market capitalization and they are finally investing the cash they hold in Europe."
While Berenberg analysts called it "a fantastic deal for Actelion and its shareholders" given concerns about the long-term growth prospects for its main products, Jefferies analysts said they did not expect any counterbids or competition concerns to derail the deal.
After J&J launched and then halted discussions with the Swiss company, Actelion has been the subject of takeover speculation for weeks. After J&J returned and began exclusive negotiations in December, French drugmaker Sanofi was sidelined after it had also showed interest, sources said. Pressure on its management was added by Sanofi's failure to come away with a big deal for a second time.
J&J expected to accelerate its revenue and earnings growth rates and be immediately accretive to its adjusted earnings per share by the transaction, the company said.
"We believe this transaction offers compelling value to both Johnson & Johnson and Actelion shareholders," Alex Gorsky, J&J chairman and chief executive, said in a statement.
Based and listed in Switzerland under the title of R&D NewCo and led by Jean-Paul Clozel, Actelion will spin out its research and development unit into a standalone company.
 The new unit will be launched with 1 billion francs in cash and the shares of R&D NewCo will be distributed to Actelion's shareholders as a stock dividend.
The transaction was hailed by Urs Beck, fund manager at EFG Asset Management that holds Actelion shares.
"J&J is a good partner with a huge distribution network. For Actelion's founders that is certainly a good solution. Mr and Ms Clozel (Martine Clozel is chief science officer) can do research for another 20 years and J&J has gained an interesting indication," he said.
"It's a huge deal and J&J plays in a different league from Sanofi, they can finance that without difficulties. I don't see Sanofi stepping in with a higher offer at some point, that doesn't make sense any more," he added.

Christopher J. Mitchell

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