Mad Money

Cramer: My $27B prescription for Johnson & Johnson

Value-creating takeover play for Johnson & Johnson

(Click for video linked to a searchable transcript of this Mad Money segment)

Jim Cramer thinks there's something Johnson & Johnson could do, right now, to create significant shareholder value.

Acquire Smith & Nephew.

Smith & Nephew is a London-based supplier of global medical devices. And despite a hefty market cap of $27 billion, Cramer thinks a deal could add value immediately, in part because previous reports of a merger with Stryker sent shares of both companies higher.

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Although reports proved to be erroneous, "When you hear about a deal and the buyer's stock roars higher, that tells you this market is eager to reward companies that make smart acquisitions."

And Jim Cramer believes a marriage between Smith & Nephew and Johnson & Johnson is a very smart acquisition.

"JNJ's medical device business gets about half of its sales from orthopedics and surgical care, which is Smith & Nephew's bread and butter. Plus, in a world where Zimmer Holdings and Biomet are merging to create a larger entity with greater reach, JNJ would be well served to do a deal so that its medical device division can fend off this new competitive threat," Cramer said in support of his idea.

Also, Cramer said the deal would help alleviate pricing pressure in the hip and knee replacement markets, and that since Smith & Nephew is headquartered in Britain, it would make good use of JNJ's cash domiciled outside the United States.

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Now, before you blow a gasket, Cramer knows that in the past he's advocated that Johnson & Johnson break itself into three smaller companies.

And that remains Cramer's first preference.

"But if JNJ isn't going to follow my break-up advice, then it really should do something to bolster its medical device division," he said. And Cramer thinks of all the possible moves, few could be more strategic than acquiring Smith & Nephew.

Call Cramer: 1-800-743-CNBC

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