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Pharma & Bio Ingredients
Pfizer had been reviewing its options for the division, which reported sales of $3.9 billion in 2005, since February so it could focus on its prescription drug business.
Johnson & Johnson Chairman and Chief Executive William C. Weldon said such strong products rarely come on the market.
"These are extraordinary assets that will bring sustainable long-term value to the shareholders of Johnson & Johnson," Weldon said.
He said the deal helps the company with its strategy of balancing its three business segments. With the acquisition, prescription drugs and the medical devices and diagnostics unit will account for 40 percent and 35 percent of revenues, respectively, and consumer products will jump from 18 percent last year to 25 percent.
"This allowed us to solidify the position we have in the consumer area," Weldon told The Associated Press.
"We continue to look in the medical devices and diagnostics area for opportunities," as well as in pharmaceuticals, he said.
The deal comes after J&J lost an intense bidding war to rival Boston Scientific, which acquired heart-device maker Guidant Corp. for $27 billion in April. Weldon said J&J "had the discipline to step out" when the price got too high, but that the loss of Guidant was unrelated to the Pfizer deal.
Independent pharmaceuticals analyst Hemant Shah said J&J paid a "scarcity premium" to beat out competitors for the assets, doling out more than four times the Pfizer unit's annual revenues. It was "the highest I've ever seen for consumer products," he said.
"This will make them by far the largest" consumer health company, Shah said, with a very stable new business with steady mid-single-digit growth likely as long as J&J invests enough in advertising and product updates and spinoffs.
Johnson & Johnson, which had $50.5 billion in 2005 revenues, will also acquire the U.S. over-the-counter switch rights to the prescription nonsedating antihistamine Zyrtec upon patent expiration.
Weldon said that with approximately $17 billion in cash on hand, J&J will cover the purchase mainly with cash, plus some "complementary short-term borrowing."
