There's no question that Johnson & Johnson (NYSE:JNJ) has been one of the most stable companies around. You don't survive and thrive for over 130 years and increase earnings and dividends every year for decades without being rock-solid.

That's why J&J's decision to acquire Actelion seemed so out of character. Johnson & Johnson paid a big premium for a smaller company whose top drug faces generic competition. But J&J's Actelion deal might not be totally crazy. Here's why.

Drawing of big fish eating small fish

Image source: Getty Images.

1. It really could boost revenue and earnings.

Johnson & Johnson thinks that buying Actelion will increase its revenue growth rate by at least 1% annually. The healthcare giant also projects the acquisition will bump its annual earnings growth rate by 1.5% to 2%, starting with higher earnings of $0.35 to $0.40 per share in the first year.

Those seemingly small percentages mask what could amount to a huge amount of money over time. Johnson & Johnson grew revenue in 2016 by 2.6% over the prior year and earnings by 7.3% year over year. A 1% increase to that revenue growth rate would increase the company's sales more than $38 billion in total by 2025. A 2% increase to J&J's annual earnings growth rate would result in over $23 billion in added earnings by 2025.

Is this kind of growth realistic? Actelion does have a promising pipeline with three drugs in late-stage development. J&J's chief scientific officer Paul Stoffels said that the company sees significant potential with these late-stage candidates.  I wouldn't dismiss J&J's projections as being off-base -- if Actelion's pipeline delivers as expected. 

2. It's tax-effective.

One thing is for sure about Johnson & Johnson's Actelion acquision: It's a tax-effective way to use the company's cash parked overseas. 

But what about the possibility for corporate tax reform in the U.S., especially the potential for repatriating money at a low tax rate? That would be great for J&J. But even if the GOP's proposed tax plans are enacted, buying Actelion now is better from a tax perspective.

President Donald Trump has proposed a one-time tax rate of 10% on cash brought back into the U.S. by corporations. This rate would be much lower than current (or proposed) corporate tax rates. However, Johnson & Johnson has already paid foreign taxes on its money invested outside of the U.S. Using the cash to buy Actelion, which is headquartered in Switzerland, won't require J&J to shell out any more on taxes.

3. The spin-off might work better than expected.

Johnson & Johnson technically isn't acquiring all of Actelion. A unique twist with the deal is that Actelion's research and development unit will be spun off into a stand-alone entity that will be traded on the Swiss stock market. J&J will own 16% of this new company and will have rights to another 16% through a convertible note. I kind of like this part of the deal.

Actelion's team had been resistant to a complete takeover in the past. Spinning off R&D as a separate company should prevent what would have likely been significant turnover among Actelion's scientists. The spin-off provision allows Johnson & Johnson to have a vested interest in what this experienced research team can do in the future. There's even a possibility that the spin-off company could be more successful than anyone expects. 

But still...

So, yes, there are a few potentially positive things about Johnson & Johnson's acquisition of Actelion. Does that mean that I like this deal? Well, no.

Actelion isn't a bad fit for J&J from a product standpoint, but I still think the company is spending way too much. There's a not-so-insignificant chance that Johnson & Johnson won't make its $30 billion back -- ever. A lot is riding on Actelion's pipeline.

I don't believe that Johnson & Johnson's bid for Actelion is totally crazy. But it's definitely not among the company's smartest moves.