Johnson & Johnson Steals Mentor Corp.: Who's Next?

Last Monday, Johnson & Johnson (JNJ) announced that it had agreed to acquire Mentor (MNT) for $1.07 billion or $31/share, a 92% premium to the prior day’s closing price. While this may sound like a whopping deal for MNT investors, the fact remains that JNJ stole Mentor and likely underpaid for the company. Mentor shares, already down 57% on the year, would have needed to be taken out at a 132% premium simply to match the price level at which they were trading at not too long ago. While another 30-40% on top of JNJ's offer would be great for Mentor’s long term shareholder base, don’t expect it -- JNJ has a war chest of cash to outbid anyone, and at a time when elective procedures are off due to the current recession and raising cash is almost impossible, JNJ is destined to take the position of market leader on the cheap.

Let’s take a quick look at what JNJ bought and then we want to throw out two other names to think about as valuations come close to rock bottom among aesthetic stocks.