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.
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