J&J Receives Buyout Offer For Sterilization Products Unit

Johnson & Johnson (NYSE:JNJ) announced that Fortive Corporation (NYSE:FTV) has offered to acquire its Advanced Sterilization Products (“ASP”) business, a unit of its surgical systems and instruments subsidiary Ethicon. Fortive has proposed a binding offer with an aggregate value of $2.8 billion for the unit. The offer comprises $2.7 billion in cash and $100 million in retained net receivables.

J&J has 120 days to accept the offer during which it plans to consult with various work councils. If the offer is accepted, the transaction is expected to close in early 2019.

ASP is a global leader in providing offerings including capital, consumables and software for use in innovative sterilization and disinfection solutions to protect patients against hospital-acquired infections. The business unit generated sales of $775 million in fiscal 2017.

J&J is in the process of streamlining its business as part of its strategic roadmap for better resource utilization and driving shareholders’ return. Earlier in March, the company received a binding offer from a private equity firm, Platinum Equity, for its LifeScan diabetes device unit. The firm has offered approximately $2.1 billion for the unit. It has already announced the closing of Animas Corporation in October 2017.

Shares of J&J have lost 12.1% so far this year compared with the industry’s 3.9% decrease.

Fortive expects to create a global market leader with the potential acquisition of ASP which has large installed base and very strong brands. This will also help the company to expand its reach in the attractive medical sterilization and disinfection market with strong growth potential.

Fortive stated that this acquisition is in line with its long-term strategy and expects the deal to be accretive to earnings in its first full year of operation.

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Zacks Rank & Stocks to Consider

J&J currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the pharma sector include H Lundbeck A/S (OTC:HLUYY) and Eli Lilly and Company (NYSE:LLY) .While H Lundbeck sports a Zacks Rank #1 (Strong Buy), Lilly carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

H. Lundbeck’s earnings estimates increased from $3.20 to $3.57 for 2018 and from $3.24 to $3.38 for 2019 over the last 30 days. The company came up with an average four-quarter positive surprise of 9.8%. The company’s stock has gained 32.4% so far this year.

Lilly’s earnings estimates increased from $4.88 to $5.12 for 2018 and from $5.29 to $5.46 for 2019 over the last 60 days. The company came up with a positive earnings surprise in all the four trailing quarters with an average beat of 8.2%.

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