NEW YORK — Johnson & Johnson, which markets diabetes-care products made by Inverness Medical Technology Inc., said Wednesday that it's in talks to buy the business from Inverness for about $1.3 billion in hopes of regaining market leadership in blood sugar monitors.
The health-care giant said that as part of the deal, Inverness would spin off its non-diabetes businesses--women's health, nutritional supplements and clinical diagnostics--to form a publicly traded company owned by Inverness shareholders.
J&J's LifeScan unit has been marketing Inverness' glucose-monitoring systems, including the One Touch FastTake and One Touch Ultra meters and strips monitoring systems, for the last three years.
Johnson & Johnson had a 50% market share in diabetes care in 1996, analysts said, but by 1999 its share had declined to about 34%, behind Roche Holding Ltd., maker of AccuCheck Advantage blood glucose monitors, with a 38% share.
David Gruber, an analyst with Lehman Bros. in New York, said Inverness has helped Johnson & Johnson "regain some momentum" in this business, and the deal will provide research and development in implantable pump technology.
Under the terms being discussed, shareholders of Waltham, Mass.-based Inverness would receive J&J stock worth $35, plus a common stock interest in the new company, for each share of Inverness.
Without considering the value of the spinoff of the non-diabetes business to Inverness shareholders, the $35 price represents a 20% premium to the prior 20-day trading average, the companies said.
The net equity value of the diabetes-care products business would be about $1.3 billion, based on Inverness' 38 million shares outstanding.
J&J said it would take a one-time charge of about $100 million, or 7 cents a share, in connection with the deal this year, primarily associated with research and development. It estimated the deal would dilute its earnings by 2 cents a share this year and 2 cents a share in 2002. Thereafter, the deal would increase its earnings, it said.
Inverness shares fell 31 cents to close at $35.60 on the American Stock Exchange, while New Brunswick, N.J.-based J&J shares rose 30 cents to close at $98.25 on the New York Stock Exchange.