Johnson & Johnson to Merge with ALZA Corporation In $10.5 Billion Stock-for-Stock Transaction

02-Apr-2001

Johnson & Johnson (NYSE: JNJ), the world’s most comprehensive and broadly based manufacturer of health care products, and ALZA Corporation (NYSE: AZA), a research-based pharmaceutical company and a leader in drug delivery technologies, today announced they have entered into a merger agreement under which Johnson & Johnson will merge with ALZA in a stock-for-stock exchange.

The transaction has an estimated net equity value of $10.5 billion, as of the close of business on March 26, 2001, based upon ALZA’s approximately 295 million fully diluted shares outstanding. ALZA shareholders will receive a fixed exchange ratio of .49 shares of Johnson & Johnson common stock for each share of ALZA in a tax-free transaction. Johnson & Johnson intends to account for the transaction as a pooling of interests.

The boards of directors of Johnson & Johnson and ALZA have given approvals to the merger, which is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and the European Union merger control regulation, and other customary closing conditions. The agreement will require the approval of ALZA’s shareholders.

Johnson & Johnson Board Chairman and Chief Executive Officer Ralph S. Larsen said, “This exciting merger of two strong companies will strengthen several of our key pharmaceutical franchises, while accelerating sustainable revenue growth and bringing us important technologies for the future. It’s an excellent strategic fit for Johnson & Johnson.”

William C. Weldon, a vice chairman of Johnson & Johnson, commented, “As a world leader in drug delivery technologies, ALZA will bring us significant new product opportunities and will enable us to extend product life-cycles. Products and technologies from ALZA will enhance existing Johnson & Johnson growth platforms in areas that include oncology, women’s health, urology, pain management and the central nervous system. Mr. Weldon also said that ALZA will retain its name and management as a free-standing Johnson & Johnson company, and will continue to develop new products based on their drug delivery technologies for its other pharmaceutical customers.”

Ernest Mario, Ph.D., Chairman of the Board and Chief Executive Officer of ALZA, said, “Becoming part of Johnson & Johnson will benefit all of our key audiences -- including patients, shareholders, customers and employees. The merger will enable our shareholders to gain significant value through ownership of Johnson & Johnson shares. This merger will enable our products to reach more patients worldwide, and will allow for the application of advanced drug delivery technologies to a broader spectrum of new and existing pharmaceutical products. Our employees will benefit from the advantages that Johnson & Johnson, a large, highly successful corporation, can provide to enhance their personal and professional growth.”

The transaction is expected to close by the early part of the third quarter of 2001. The merger is expected to be dilutive to Johnson & Johnson in 2001 and 2002, and accretive in 2003 and thereafter. Excluding one-time charges, dilution to earnings per share is estimated to be $.14 and $.05 in 2001 and 2002, respectively. In January of 2001, Johnson & Johnson expressed comfort with the range of analyst estimates of $3.80-$3.88, as published by First Call. As a result of underlying strength of the business, Johnson & Johnson anticipates being able to fund a portion of the impact of the merger. The Company recommends that analysts reduce their full year estimates by $.10 in 2001 and that no changes be made to 2002 EPS estimates based on this transaction.

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