Johnson and Johnson takeover would have ‘strong rationale’

The acquisition of Medtronic, the medical devices company, could represent a prudent move for Johnson and Johnson, the healthcare company.

An expert claims that the deal would make sense for Johnson and Johnson as it wants to increase its product portfolio because of impending patent expirations and improve its standing in the cardiac care market.

However, an acquisition attempt would likely necessitate a 30 to 40 per cent premium on Medtronic’s shares – an “aggressive, but achievable” goal, according to Catherine Arnold, a Credit Suisse analyst.

She is quoted by Forbes as saying: “A deal has a strong strategic rationale. Larger-than-appreciated growth challenges, at the crux of our underperform rating, may prompt Johnson and Johnson to pursue a ‘mega-deal’.”

“Cardiac rhythm management (CRM) is the largest hole in Johnson and Johnson’s med-tech portfolio, and gaining the number one position through Medtronic would fill this gap, even with decelerating CRM market growth,” she added.

Earlier this month, Medtronic announced a recall of the 8731 model of its intrathecal catheters, as well as its 8598 intrathecal distal revision kit.

The company said it had informed the UK’s Medicines and Healthcare products Regulatory Agency.

Medtronic’s shares went down by ten per cent on receipt of the news, worsened by the announcement that quarterly sales could fall short of expectations.

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