J&J; to Repatriate $11 Billion to U.S.

Johnson & Johnson said it would return about $11 billion in foreign profit to the U.S., the first company to declare it will take advantage of a one-year tax holiday.

The New Brunswick, N.J.-based maker of a variety of products including Band-Aids and heart stents would record a fourth-quarter cost of $800 million in federal and state taxes to bring home the money, it said in a filing with the Securities and Exchange Commission on Wednesday.

J&J; didn’t say what it planned to do with the windfall, which the law requires be reinvested in the U.S. Analysts said the company may use the cash to help finance its purchase of Guidant Corp. for $25.4 billion, in a deal that Johnson & Johnson said would be financed 40% with cash to give it more flexibility to pursue other acquisitions.

“It’ll be put to use; it’s not going to sit in a checking account,” said Jon Fisher, who helps manage about $25 billion for Fifth Third Asset Management in Cincinnati, including about 3.5 million J&J; shares. “They wouldn’t be doing it if they didn’t have an earnings-friendly or tax-friendly way to put it to use.”

Fisher said the drug maker may use some of the cash to pay for Guidant.

Other companies, including 3M Co., Pfizer Inc. and Eli Lilly & Co., have said they’re considering repatriating funds. Johnson & Johnson is the first company to definitely say in filings that it will do so since the law was enacted Oct. 22.

J&J;’s return of the funds “will be accomplished with minimal, if any, borrowing” and investment decisions will be made when the funds are actually remitted, a company spokesman said.

The U.S. Treasury said last week that companies can use earnings repatriated at the reduced tax rate for hiring and training, capital investment, research and development, debt retirement, pension investment, advertising, U.S. acquisitions and purchase of patent rights.

They can’t use the funds to repurchase shares, pay dividends or pay executives.

U.S.-based companies may return as much as $320 billion in profit they have invested overseas to avoid paying U.S. taxes, according to an analysis by Greg Kelly of Susquehanna Financial Group. Other estimates have put that figure higher.

Shares of Johnson & Johnson fell 21 cents to $62.82 on the New York Stock Exchange.