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JOHNSON & JOHNSON 8-K Report, Material Agreement (Jun 12, 2012)

Filed June 12, 2012For Securities:JNJ

Summary

Johnson & Johnson (JNJ) announced a significant corporate action on June 12, 2012, involving a substantial share repurchase program and progress on its acquisition of Synthes, Inc. The company, through its subsidiary Janssen Pharmaceutical, entered into accelerated share repurchase (ASR) agreements with Goldman Sachs and J.P. Morgan to buy back approximately 203.7 million shares of JNJ common stock for an initial sum of $12.9 billion. This transaction is expected to conclude by the second quarter of 2013 and indicates the company's commitment to returning capital to shareholders and managing its equity structure. Furthermore, JNJ confirmed receipt of all necessary regulatory approvals for its acquisition of Synthes, Inc., with a target closing date of June 14, 2012. The acquisition, valued at approximately $19.7 billion, will be paid for with cash on hand and shares repurchased under the ASR agreements, with no new debt anticipated. This acquisition is expected to be accretive to JNJ's earnings per share, initially by $0.03-$0.05 in 2012 and $0.10-$0.15 in 2013, after accounting for integration costs and other special items.

Key Highlights

  • 1Johnson & Johnson, via Janssen Pharmaceutical, initiated an Accelerated Share Repurchase (ASR) program to buy back approximately 203.7 million shares of its common stock for $12.9 billion.
  • 2The ASR program involves agreements with Goldman Sachs and J.P. Morgan, with final settlement expected in Q2 2013.
  • 3All necessary regulatory approvals have been obtained for the acquisition of Synthes, Inc.
  • 4The Synthes acquisition is expected to close on June 14, 2012, for a total purchase price of approximately $19.7 billion.
  • 5The acquisition will be financed by existing cash and shares purchased under the ASR program; no new debt is anticipated.
  • 6The Synthes acquisition is projected to be accretive to JNJ's adjusted earnings per share (EPS) by $0.03-$0.05 in 2012 and $0.10-$0.15 in 2013.
  • 7JNJ will record an estimated $1.1 billion in after-tax special items for the remainder of 2012 related to the acquisition, including integration costs.

Frequently Asked Questions

An Accelerated Share Repurchase (ASR) is an agreement where a company buys back its own stock. JNJ is entering into ASR agreements with Goldman Sachs and J.P. Morgan to repurchase approximately 203.7 million shares of its common stock. This is a way for the company to return capital to shareholders and potentially manage its stock price and earnings per share.

The acquisition of Synthes, Inc. will be financed using Johnson & Johnson's existing cash reserves and the shares purchased under the newly announced Accelerated Share Repurchase (ASR) agreements. The company has stated that no third-party debt is expected to be incurred for this transaction.

Johnson & Johnson anticipates that the Synthes acquisition will be accretive to its adjusted earnings per share. For 2012, the accretion is estimated to be between $0.03 and $0.05 per share. For 2013, the first full year of combined operations, the accretion is projected to be between $0.10 and $0.15 per share. These figures exclude certain 'special items' related to the acquisition, such as integration costs.

While JNJ has received all necessary regulatory approvals, the acquisition is still subject to the satisfaction of customary closing conditions. The filing also mentions potential risks, including the possibility that the transaction may not close as expected, and tax implications for both JNJ and Synthes shareholders, particularly Swiss-resident individual taxpayers.