An all-cash tender for the company's 25.7 million shares, including almost 10 million held by its chief executive, Lloyd Cotsen, will begin on Friday. Analysts said a higher bid could emerge, although the company would have to pay Johnson & Johnson a 'break-up fee' of dollars 27.5m.
The price, dollars 35.25 a share, is a considerable premium to Neutrogena's share price and a high multiple of its sales, about dollars 300m last year. The acquisition will dilute Johnson & Johnson's earnings by perhaps five cents a share unless cost-cutting follows the takeover.
Johnson & Johnson shares fell 25 cents to dollars 48 3/4 , while Neutrogena gained dollars 6 1/8 to dollars 24 7/8 .
Neutrogena - whose shares traded at dollars 20 1/8 as recently as 5 August - has been a rumoured takeover target for several weeks, with Johnson & Johnson and Procter & Gamble mentioned as likely buyers.
The run-up in the share price in anticipation of a deal will almost certainly add to recent complaints about an apparent resurgence of insider trading on Wall Street.
The purchase of the Los Angeles-based manufacturer of premium hair and skin care products comes at a time big pharmaceutical and health care companies are finding it increasingly difficult to raise prices, particularly on the drugs side.
At the same time, their balance sheets are in good shape to make big acquisitions.