December 10, 2016 – December 16, 2016

Bloomberg News
“J&J’s $26 Billion Swiss Drugs Experiment”
Primary Topic – takeover attempt


Hostile takeover, White knight, Acquisition premium

Summary: Key Points in the Article

Actelion Ltd. has an acquisition offer from Johnson & Johnson of $26.3 billion. Actelion is a Swiss biotech firm specializing in pulmonary hypertension treatments. The offer represents an acquisition premium of 56 percent over the firm’s six month average stock price. However, in spite of the offer Actelion’s CEO may not support the bid.

Actelion’s CEO, Jean-Paul Clozel, has maintained his position with regard to keeping the firm independent. However, Actelion’s board may not agree with Clozel given the generous J&J offer. It remains to be seen whether Clozel is surfing for a better offer or whether other firms will enter the fray. Ultimately Actelion’s board will be required to make a decision about what is best for all shareholders.

Topics for Discussion

  1. How is this article related to capital budgeting?
  2. How do acquisitions and mergers relate to efficient markets?
  3. What is the board’s responsibility with regard to this offer?

Multiple Choice Questions

  1. Johnson & Johnson’s expected return from buying Actelion is forecast to be;
    1. about 8%
    2. more than 12%
    3. at least 15%
    4. none of these
  2. The board’s job is to provide oversight and ensure management makes decisions designed to;
    1. maximize shareholder wealth
    2. be more socially responsible
    3. increase the CEO’s utility
    4. none of these
  3. Acquisition cash flow forecasts often include expected changes to the acquiring firm’s sales due to product relationships. If positive, these cash flows are called;
    1. synergies
    2. erosion
    3. white knights
    4. none of these