JOHNSON AND JOHNSON COMPANY

Johnson and Johnson Company

Abstract

The most commonly used process for acquiring a company by what is termed an 'off-market. In the case of EIG acquiring Johnson and Johnson, the target company's shareholders are made an offer with a closing date deadline. Once an off-market takeover bid is announced, a bidder must comply with the provisions in the Corporations Act. Although this paper focuses on the decision of acquiring Johnson and Johnson by EIG. For this purpose the paper analyzes the decision to find out that whether or not EIG should acquire Johnson and Johnson. Finally this paper will provide the recommendation for this purpose. (Aboody, 2000, 261-286) The provisions include strict regulation of the communications made with the target company shareholders.

Johnson and Johnson Company

Introduction

Johnson & Johnson (NYSE:JNJ) is the world's second largest and most broadly based manufacturer of health care products, with 2008 annual sales of $63.8 billion. The company holds a significant share of the consumer and pharmaceutical markets, and is the world's largest developer and manufacturer of medical treatment and diagnostic devices. (Aboody, 2000, 261-286)

The consumer health market is expanding as consumers are taking greater responsibility and interest in their own health. Johnson & Johnson owns highly successful brands such as Tylenol, Band-Aid, and Neutrogena. The acquisition of Pfizer's Consumer Healthcare division in 2006 and addition of brands such as Listerine, Lubriderm, Visine, and Neosporin further solidified Johnson & Johnson dominance in consumer health care. (Aboody, 2000, 261-286)

The company's pharmaceutical segment faces many of the challenges that face all pharmaceutical companies, including issues surrounding patent expiration and FDA approval. In addition, there are constant threats of litigation and a growing pressure in the US and abroad to lower the price of medication.

Background

Johnson & Johnson Corporation was founded in 1886 by Robert Wood Johnson, an American entrepreneur and Industrialist. Inspired by the developing scientific understanding of proper of sanitation, Johnson aimed to make antiseptic surgical procedures easier. Through numerous targeted acquisitions and research over the next century, the company steadily diversified its business to encompass pharmaceutical, medical devices, and consumer packaged goods. (Aboody, 2000, 261-286)

Executive Summary

Johnson & Johnson has interests in a broad spectrum of the health care market, and takes a decentralized approach to managing its 250 operating companies and franchises. In the company's continuing effort to diversify its business and increase profits, Johnson & Johnson is constantly acquiring new companies, including 8 in the last year alone. In 2007, worldwide sales totaled $61.1 billion, making Johnson & Johnson the second largest manufacturer of health care products, behind Pfizer. (Allison, 1984, 56-60)

Johnson & Johnson's 2009 second quarter net income fell by 3.5% to $3.21 billion compared to $3.33 billion a year ago. Quarterly sales fell by 7.4 percent to $15.24 billion, down from $16.45 billion the year before but above expectations of $15 billion. The decline is partially attributable to two major patent expiries (Risperdal and Topamax), as well as a decline 4.5% in consumer products ...