Here at Medgadget, we bring the freshest medical device news straight to your screen. Unfortunately, as of the middle of the night (West Coast time) Thursday, there is no new updates regarding the potential procurement of Guidant by Johnson and Johnson. Just to bring everyone up to speed, over the past 10 months, J&J and Guidant have been going through the necessary regulatory courtship procedure when one giant wishes to phagocytose another. J&J has until today to finalize the deal. Unfortunately, with the recent short-circuiting debacle, subpoenas being issued a few days ago and now New York Attorney General Eliot Spitzer filing suit, Guidant is hardly turning out to be the “purest” of brides. As such, J&J has stalled and hinted at new terms while certainly trying to calculate the best exit strategy (rumor has it those are important). Ashley Heher of the Associated Press (as reported at Newsday.com) writes:
Even if the deal that the two companies agreed to 10 months ago goes through, J&J likely will pay significantly less than the original price, some experts said. And if J&J scraps it, the companies may find themselves in court.
While the agreement stipulates a $700 million breakup fee, J&J has already suggested that a stream of product recalls in recent months by Guidant, as well as federal investigations into the device maker, may have had the materially negative impact that would allow it to simply walk away.
The companies have until Friday to close the purchase.
“That deal is a goner it’s D.O.A.,” said Anthony Sabino, a mergers and acquisitions attorney and a professor at St. John’s University after Spitzer’s announcement. “You could knock me over with a feather if they go through with this.”
The requisite counter opinion:
Alex Arrow, an analyst with Lazard Capital Markets, said he believed the deal would still go through, but at a significantly lower cost.
“We believe the main motivation behind (J&J’s) statement may be to gain extra negotiating leverage,” he wrote in a research note released Thursday morning.
Analysts speculated the $76-per-share proposed acquisition price could drop as low as $60 per share.
Glenn Novarro, an analyst with Banc of America Securities, predicted in a research note that the deal would go through at $69 per share.
Since June, Guidant has recalled or issued warnings on about 88,000 heart defibrillators including its top seller, the Contak Renewal 3 and almost 200,000 pacemakers because of reported malfunctions. The company faces multiple lawsuits from patients and shareholders, as well as a reported criminal investigation by the U.S. Food and Drug Administration.
When the news finally does break, you can expect it to be all over your news source of preference. Given that it’s Friday, we’ll have commentary for you next week.
Links to Guidant and Johnson and Johnson