Johnson & Johnson: More Buffett-Like Every Day

Johnson & Johnson (NYSE: JNJ  ) is continuing on its Buffett-like way. Emulating Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) purchase of Burlington Northern -- first invest in the company, then buy the whole darn thing -- Johnson & Johnson announced today it's in talks to purchase vaccine maker Crucell (Nasdaq: CRXL  ) .

The health-care conglomerate already owns about 18% of Crucell through an equity investment and drug development deal. If the full buyout goes through -- there are still details to be worked out -- the purchase price could be in the $2.3 billion range.

That's a fairly large purchase for Johnson & Johnson, but I like the addition of vaccines to the conglomerate's mix of offerings. Once a vaccine becomes an established player in doctors' medical bags, it's really hard to unseat it. One of the best products to come out of Pfizer's (NYSE: PFE  ) purchase of Wyeth was its pneumococcal-bacteria vaccine Prevnar and the followup, Prevnar 13.

Except for garnering a piece of the arbitrage money, it might be a little late to jump into Crucell; I doubt you'll see another company start a bidding war with Johnson & Johnson. Being a major shareholder in Crucell, J&J is well-positioned to know the true value of the company, and some drugmakers might be off the table from bidding anyway. Crucell developed childhood vaccine Quinvaxem with Novartis (NYSE: NVS  ) , which Crucell could lose through a change-in-control clause should it be acquired by certain pharmaceutical competitors.

Plus it's not like pharmaceutical companies have been itching to pick up vaccine assets. Abbott Labs (NYSE: ABT  ) put the vaccine business that it got in the acquisition of Solvay up for sale, but didn't receive bids high enough to justify letting it go.

That might be a sign that Johnson & Johnson is overpaying, but like investors in Berkshire, Johnson & Johnson's investors will just have to trust that management can deploy capital in a successful manner.

James Early has more on Johnson & Johnson, as it is today's "11 O'Clock Stock" buy opportunity.

Berkshire Hathaway and Pfizer are Motley Fool Inside Value choices. Berkshire Hathaway is a Motley Fool Stock Advisor recommendation. Novartis is a Motley Fool Global Gains pick. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson, which is a Motley Fool Income Investor selection.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool owns shares of Berkshire Hathaway and has a disclosure policy.


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