European regulatory authority casts an eye over Johnson & Johnson’s Synthes takeover

The European Commission (EC) has opened an in-depth investigation into the planned acquisition of Synthes by fellow orthopaedic company, Johnson & Johnson. The EC now has until 19th March 2012 to take a final decision on whether the transaction would reduce effective competition in the EEA.

The investigation has been prompted by concerns in Europe that the proposed acquisition would remove a competitor from some markets that are already concentrated. An initial investigation showed that the proposed transaction would combine two of the leading suppliers of spine devices and would strengthen the position of Synthes as the current market leader in trauma and CMF devices and of J&J in shoulder devices in a substantial number of EEA member states. The EC also has concerns that the remaining competitors in many of the markets may not be able to exert sufficiently strong competitiveness with the merged entity. The removal of Synthes may also have a negative impact on the level of innovation, leading to a reduction of choice for patients and potentially an increase in prices for the orthopaedic medical devices concerned. Consequently, at this stage, the acquisition raises “serious doubts” as to its impact on competition.

Synthes accepted a US$21.3 billion takeover offer from J&J in April 2011. The deal, which has a target completion date of mid-2012, would make J&J’s DePuy arm the largest orthopaedic device manufacturer in the world.

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