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We're trying to buy it. We're definitely buying it. We're buying it, but only if nothing else bad happens.
In September, the duo said they were in talks to complete a buyout. Normally these things would just remain behind closed doors until final details were worked out, but Dutch law seems to require Crucell to make the announcement. It did the same thing when it was in talks with Wyeth. That potential deal fell through when Pfizer (NYSE: PFE ) bought Wyeth.
Less than a month later, the deal terms between J&J and Crucell had been worked out, and the two just needed to wait for antitrust authorities to sign off on the deal.
Or so it seemed. At the end of October, Crucell said it was stopping shipments of two vaccines because of a microbiological contamination at its plant in Korea.
Johnson & Johnson has decided that the problem isn't big enough to derail the deal. Manufacturing at the plant should be back up and running by February, so Johnson & Johnson will commence its acquisition of the shares it doesn't already own before Dec. 10.
Management at Johnson & Johnson probably knows what it's getting itself into -- the company had already owned nearly 18% of Crucell even before the talks began -- but I have to wonder whether Johnson & Johnson really needs the headache. Inheriting a manufacturing issue on top of all the manufacturing problems it already has doesn't seem like the best idea.
Johnson & Johnson said the manufacturing interruption didn't constitute a "material adverse effect" that would have allowed it to break the deal, but this seems to be a gray area that could be exploited if it wanted to. Why not negotiate for better deal terms like it did with Elan (NYSE: ELN ) to get a better deal after Biogen Idec (Nasdaq: BIIB ) balked? At the very least, negotiating would allow Johnson & Johnson to buy some time and see if the manufacturing problems could be fixed as quickly as Crucell says they can.
Johnson & Johnson did leave open the possibility of breaking the deal if anything else comes to light before the offer is completed. Perhaps the plan is to stall between when it initiates the offer to buy the outstanding shares and when it finally closes the sale.
Investors may not have seen the end of this dragged-out engagement.
Toby Shute goes value shopping in a picked-over market.