M&A

J&J, Guidant Agree on New Deal

J&J reduces its bid for Guidant by $4 billion.
Stephen TaubNovember 15, 2005

It looks like Johnson & Johnson will buy Guidant Corp. after all.

The health-care products giant has agreed to plunk down $21.5 billion in cash and stock, roughly $4 billion less than it had agreed to shell out nearly a year ago. According to the joint announcement, the transaction has an estimated net acquisition cost of $19 billion based upon Guidant’s approximately 340 million fully diluted shares outstanding, net of estimated cash on hand at the time of closing.

The merger agreement comes about a week after J&J seemingly walked away from its December 20, 2004, $25.4 billion pact amid concerns about defective Guidant defibrillator products, regulatory probes, and lawsuits. J&J officials said the series of events “have had a material adverse effect on Guidant,” so it therefore was “not required to close the acquisition.”

Under the new deal, each share of Guidant common stock will be exchanged for $33.25 in cash and 0.493 shares of J&J common stock. This works out to about $63.08 per Guidant share.

The revised agreement has been approved by the boards of directors of both J&J and Guidant. “We are delighted that our companies have reached an accord,” says William C. Weldon, chairman and chief executive officer of J&J.

The deal received approval from the Federal Trade Commission on November 2.

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