Johnson to pay dollars 1bn for Kodak's diagnostics arm: Healthcare takeover spree continues

JOHNSON & JOHNSON, the big US consumer drugs group best known for its baby products, snapped up another piece of Kodak's health care business yesterday, paying just over dollars 1bn for its clinical diagnostics division.

The purchase comes only a week after SmithKline Beecham bought Kodak's Sterling drugs division for dollars 3bn, eclipsing J&J as the world's largest over-the-counter medicines manufacturer. The week before that J&J spent dollars 905m buying Neutrogena, maker of upmarket skin products.

Yesterday's deal will add clinical chemistry and immuno-diagnostics to J&J's existing diagnostics businesses, which include blood screening for donor clinics, hospitals and laboratories as well as home pregnancy and blood glucose testing. With the acquisition of the Kodak assets, which had sales of dollars 535m last year, J&J will become the world's third- largest provider of diagnostic tests.

Kodak's clinical diagnostics group bought Amersham International in 1992 for pounds 84m and employs about 600 people in Britain, operating a manufacturing plant in Cardiff and research facilities specialising in amino-affay testing, a form of detailed blood screening.

J&J said it would continue to operate from those sites as well as from Rochester, New York, and Strasbourg in France.

As with last week's Sterling deal, the price was well above most analysts' estimates for the business, causing a three-eighths of a dollar drop in J&J's share price to dollars 497 8 . Most said the deal made strategic sense, rounding out J&J's product line in a key part of the industry and giving it more of a presence in diagnostic labs and clinics.

Many more mergers are likely in the health care industry in coming months, analysts say, as big pharmaceutical and personal care firms broaden their interests.

The world's big health care groups are under pressure to make acquisitions because price rises have been blocked by competitive and regulatory pressures. Most have strong balance sheets and are taking advantage of opportunities such as the Kodak divestiture to fill gaps in their business.

The sale brings to almost dollars 5.75bn the amount Kodak has raised by selling non-core businesses. It expects another dollars 2bn from L&F household division, eliminating much of the dollars 7bn debt remaining from 1980s acquisitions.