INDIANAPOLIS - US consumer giant Johnson & Johnson (J&J) has agreed to a revised deal to acquire embattled heart device maker Guidant, thus ending a stand off between the two companies over the latter's pending litigation involving faulty pacemakers and implantable defibrillators.
Under the new deal, Johnson & Johnson will pay $21.5 billion in cash and stock for the Indianapolis-based Guidant. This is nearly $4 billion or 15 percent less than last year's offer of $25.4 billion. Consequently, the deal values Guidant at $63.08 per share as opposed to the previous offer of $76 per share.
James M. Cornelius, Guidant's chairman and interim chief executive was quite happy with the proposed changes, "It appropriately reflects the business challenges we have experienced in this period. We remain confident about Guidant's ability to rebuild . . . market share."
The deal was initially penciled in to be completed in the third quarter of the current year, but Guidant's innumerable problems over its faulty pacemakers and implantable devices forced a rethink at Johnson & Johnson. When it began to look like, J&J was going top ditch it, Guidant took the company to court to order it to complete the deal.
But the New Brunswick, N.J-based Johnson & Johnson said that the original terms were not binding since the company was facing legal problems by the dozen. It now looks like Johnson got a very big discount on what could potentially be a gem in its medical device division. "They got one hell of a discount," said Jerry Reisman, a financial legal adviser with the law firm Reisman, Peirez and Reisman. "They believe that's certainly enough money to cover any litigation costs and any potential awards that may come in the future."
In the backdrop of the announcement of a new deal, Guidant shares soared by $4.75, or 8.2 percent, to close at $62.50, while Johnson & Johnson shares jumped by $2.32, or 3.8 percent, to close at $62.83.
