J&J to buy breast implant maker Mentor for $1.07 billion

Analysts said J&J is paying "a giant premium" for the maker of MemoryGel breast implants, liposuction equipment and "barrier" skin repair products, with an eye to their long-term value for an aging population.

Under the deal, J&J will start a cash tender offer for $31 per share -- nearly double Mentor's Friday closing price of $16.15 -- for a total of $1.07 billion. J&J will assume Mentor's net debt, about $50 million, and make company a stand-alone unit in its Ethicon Inc. business, a top provider of sutures, mesh and other surgical products.

"For Mentor, what a payday!" said Erik Gordon, associate dean and head of biomedical industry programs at Stevens Institute of Technology.

Mentor shares jumped $14.43, or 89 percent, to $30.58; J&J shares, weighed down by a big decline in the broader market, fell $3.25, or 5.6 percent, to $55.33.

"It's a good space for J&J to get bigger in because it's a space with the least cost-control pricing pressures," as patients, rather than insurers or government health programs, generally pay for cosmetic surgery, Gordon said.

Johnson & Johnson doesn't have a cosmetic surgery franchise per se, but this summer it launched a collagen-based skin filler called Evolence. Some products made by Ethicon and by Ethicon Endo Surgery, which makes devices for stomach-reduction and other operations, increasingly are being used in plastic surgery, including sutures, mesh implants for facelifts, and harmonic scalpels, J&J spokesman Bill Price said.

"Mentor's going to become sort of a cornerstone for ... our strategy to become a major player in this area," he said.

Santa Barbara, Calif.-based Mentor has about 1,300 employees and had $373 million in 2007 sales.

"The addition of Mentor, a market-leader and one of the most respected companies in the aesthetic space, expands our capacity to provide physicians with products that can restore patients' appearance, self-esteem and quality of life," Alex Gorsky, the J&J company group chairman overseeing Ethicon, said in a statement.

The deal is expected to shave 3 to 5 cents per share off of J&J's 2009 earnings. Both companies' boards of directors have approved the deal, expected to close during the first quarter.