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Jabil details costs of its deal with Johnson & Johnson

Margie Manning

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Jabil headquarters in St. Petersburg

Top executives at Jabil Inc. have called a deal with Johnson & Johnson Medical Devices Cos. “transformational,” and said it would add up to $1 billion in revenue for the St. Petersburg company during the current fiscal year.

Now, Jabil is detailing the costs.

Jabil (NYSE: JBL), a manufacturing solutions company and the largest company in St. Petersburg, has spent $270.3 million in cash since February to acquire Johnson & Johnson Medical Devices assets, according to an annual report filed by Jabil with the U.S. Securities and Exchange Commission.

The company paid $153.2 million in cash at an initial closing Feb. 25 and a second closing on April 29. Jabil completed a third closing on Sept. 30 for a cash payment of $117.1 million, the filing said.

A final closing is expected to occur during Jabil’s fiscal year 2020, which began Sept. 1.

Jabil had acquired five Johnson & Johnson Medical Devices factories as of Sept. 29, Mark Mondello, Jabil’s CEO, said in a conference call with analysts, and took on the employees at those sites as well.

The $270 million is related to inventory at the Johnson & Johnson facilities, a spokeswoman for Jabil said.

Separately, Jabil has spent about $52.7 million for on-boarding and integration costs. That’s about two-thirds of the $80 million Mondello said would be spent when he announced the deal to acquire 14 Johnson & Johnson sites a year ago.

The Johnson & Johnson deal is part of diversification efforts by Jabil, a global company that provides comprehensive electronics design, production and product management services to companies in various industries and end markets. For several years, Apple Inc. (Nasdaq: AAPL) has been Jabil’s largest customer and it continued to be the largest customer in FY 2019. But the percentage of Jabil’s overall business that came from Apple dropped from 28 percent in FY 2018 to 22 percent in FY 2019.

Here are some other key measures from the annual report from Jabil.

Employees. Jabil had 200,000 employees as of Aug. 31, up from 199,000 workers from a year earlier. The company did not say how many of the new workers came from Johnson & Johnson. It’s also in the midst of a restructuring plan that includes headcount reductions and is designed to “optimize” the company footprint in China.

Properties. Jabil has 52.8 million square feet of property, mostly used in manufacturing operations, in Asia, Europe and the Americas. That’s up from 44.6 million square feet a year ago.

Financials. Jabil’s revenue, including the Johnson & Johnson operations since February, was $25.3 billion for FY 2019, up 14 percent from the prior year. Net income swelled to $287.1 million, or $1.81 a share, compared to net income of $86.3 million, or 49 cents a share a year earlier. Cash and cash equivalents were $1.16 billion on Aug. 31, down from $1.26 billion a year earlier.

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