Cravath, Swaine & Moore and Sullivan & Cromwell are guiding Johnson & Johnson’s plan announced Tuesday to purchase heart pump maker Abiomed Inc. for $17.3 billion.
Cravath’s co-heads of the firm’s global mergers and acquisitions practice, Robert Townsend III and George Schoen, along with Sanjay Murti, who became partner at the Wall Street firm in January, led the firm’s J&J team.
Sullivan & Cromwell partner Matthew Hurd and co-head of its capital markets group Robert Downes took the lead on mergers and acquisition matters in the deal. Hurd has advised on several high-profile deals in the life sciences space over the years, including Bayer’s $66 billion takeover of Monsanto and StemCentrx’s $10 billion sale to AbbVie.
J&J plans to acquire the Danvers, Mass.-based medical device maker for $380 a share in cash, allowing the healthcare conglomerate to broaden its portfolio of cardiovascular technology, according to a company statement.
Life sciences has continued to be one of the hot areas for dealmaking as pharmaceutical giants look for investment opportunities—even as the rest of the mergers and acquisitions market is starting to see a slowdown.
Sullivan & Cromwell’s 2022 deals total now stands at 149, worth roughly $393 billion, according to Bloomberg league table data. It trails Simpson Thacher & Bartlett in volume for the year. Cravath has advised on 66 deals in 2022 worth $216 billion, the data show.
Cravath has been one of the go-to firms for Johnson & Johnson. The firm has advised the company on its $6.5 billion acquisition of Momenta Pharmaceuticals Inc. in 2020, its 2019 acquisition of Auris Health Inc. for $3.4 billion and its 2017 bid for Swiss biotech company Actelion. Townsend led the Cravath deal teams on those transactions.
Townsend and Schoen have advised J&J on other recent deals, including the planned spinoff of its consumer health business set to be completed next year that will allow the company to focus on its pharmaceuticals and medical devices operations.
Executive compensation partners Jonathan Katz and Matthew Bobby also advised on the Abiomed deal, as did tax partners J. Leonard Teti II and Andrew Davis. Cravath partner Sasha Rosenthal-Larrea advised on intellectual property matters, while partner Matthew Morreale on environmental matters.
At Sullivan & Cromwell, executive compensation partner Marc Treviño, IP partner Mehdi Ansari, global competition partner Michael Rosenthal, tax partners Jameson Lloyd and Gauthier Blanluet also advised on the J&J deal. Former acting head of the Justice Department’s Antitrust Division Renata Hesse and partner Adam Paris advised on antitrust issues. Hesse joined Sullivan & Cromwell in 2017 and now serves as co-head of its antitrust group.
Antitrust concerns and increased regulatory scrutiny from the Biden administration has been top of mind for dealmakers over the last year. But in the pharmaceutical industry, the question of how mergers are analyzed depends on the extent to which they have overlapping products, said Michael Carrier, professor at Rutgers Law School who specializes in antitrust and intellectual property law.
For example, if there are two large companies that have a lot of overlapping products then the agencies will likely require the divestiture of those overlapping products,so if Johnson & Johnson had a product similar to Abiomed’s, it might require a divestiture, he said. But larger companies aquire smaller ones in the pharma space—it’s how innovation gets done in the industry—so it likely isn’t going to present a significant antitrust hurdle, he said.
“The pharmaceutical industry, in contrast, is so full of hurdles, regulations, barriers, that it’s less likely that a small company would succeed, which is why there has been less challenge to the large companies acquisition of small companies in the pharma industry,” Carrier said.
The Biden administration is concerned about medical costs generally, particularly on the pharmaceutical side, and would want to make sure that the deal would not cause a significant uptick in costs for patients, said Boies Schiller Flexner antitrust partner Philip Korologos.
“There doesn’t seem to be a whole lot of overlap between J&J’s current business and Abiomed, so I would suspect that the antitrust scrutiny won’t be overly intensive,” he said.
On Monday, a federal judge blocked the merger between publishers Penguin Random House and Simon & Schuster in a significant win for the Biden administration. The deal between the two publishers is much different than the tie-up between J&J and Abiomed, but any time a court makes a statement it does give dealmakers some pause.
“Each time a court decides that there’s some kind of activity that needs to be stopped it does have an impact on other potential mergers,” Korologos said. “However, each merger is specific,” he said.
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