(Reuters) – Johnson & Johnson is in preliminary talks to acquire Swiss medical device maker Synthes for a price which could be about $20 billion, a source familiar with the situation said on Saturday.

 

A deal at that price would mark an 11 percent premium over Synthes’ current market capitalization of about $18 billion. It would allow healthcare conglomerate J&J to further diversify its healthcare business.

 

However, talks could still break down, said the source, who declined to be named because the talks are not public.

 

The medical device sector has been consolidating as pharmaceutical companies look to diversify away from drugs going off patent. Other recent medical device deals include the $5.8 billion acquisition of Beckman Coulter by Danaher Corp, announced in February.

 

Synthes shares closed up 6.2 percent in Switzerland, with traders citing market talk that the diversified healthcare company or U.S. medical device maker Medtronic Inc could be interested in buying the company.

 

J&J, which holds about $19 billion in cash, could not immediately be reached for comment on Saturday. "As a matter of policy we don’t comment on speculation," J&J spokesman Bill Price said when asked on Friday. Synthes was not immediately available to comment.

 

News of the talks was first reported by the Wall Street Journal.