Johnson & Johnson Falls, Mentor Gets A Lift

Last Wednesday, I was puzzled as to why Johnson & Johnson and Procter & Gamble were the only two Dow components to close lower (here’s my post on Wednesday’s run-up).  I think I know why…well at least for J&J!

Today, it was officially announced that Johnson & Johnson will purchase Mentor Corp. for $1.07 billion.  Mentor is a firm that makes breast implants and equipment used in liposuction. The acquistion is the latest in a series of J&J purchases, this particular deal will help J&J break into the market for products used in cosmetic procedures.

In the M&A world, shares of the target firm typically rise because the acquiring firm offers to pay a premium.  Shares of the acquiring firm tend to fall.  This case is no different.  Shares of J&J ended lower last week and continued to fall today.  Shares of Mentor have seen 13 times their average volume at mid-day and rose 89 percent.

I knew something was up!