Monday, December 01, 2008

Breast implant maker Mentor Corp. now "augmenting" Johnson & Johnson's portfolio

Santa Barbara-based Mentor Corp., one of the the largest manufacturers of silicone breast implants, is in the news today with word of a takeover bid by Johnson & Johnson. If you're a shareholder in Mentor, you're going to be making some serious coin today. J&J is paying $31 for each Mentor share, a big 92% premium to Friday's closing price but well off its 52-week high of $40.82 about 11 months ago.

Mentor, and rival Allergan, have been locked in a real dogfight for market share of the American (and world) market in breast implants. Mentor today gets almost 90% of its revenue from breast implants, most of which are sold for cosmetic proposes. To survive, Mentor had been desperately broadening their portfolios to include dermal fillers, a BOTOX alternative ("PurTox") , an Alloderm alternative (NeoForm), and medical grade skin care lines. Their expansion to this point has run right into the teeth of the financial market downturns, and their earnings and stock price had been pummeled to this point. A real interesting transcript of the company's on the record discussions with institutional investors last week seemed kind of defensive. You can read it over at the excellent Seeking Alpha website of financial stories. They sure kept this deal under wraps!

This seems like an excellent opportunity to achieve synergy with some of J&J's research and development capability and distribution networks. It puts them on more equal footing with the large corporate entity Allergan.


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