Johnson & Johnson, Guidant Agree to Acquisition Deal

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Johnson & Johnson said Tuesday it agreed to acquire Guidant Corp. for $21.5 billion in cash and stock under revised terms that value the troubled maker of implantable heart care devices at about $4 billion less than last year's original offer.

Under the revised agreement, the health care products maker Johnson & Johnson will buy Guidant for about $63.08 per share, down from the original offer of $25.4 billion, or about $76 a share, in December.

In premarket activity, Guidant shares jumped $4.85, or 8.4 percent, to $62.60, and Johnson & Johnson shares rose $1.69 to $62.20.

The deal, which was originally expected to close in the third quarter, was delayed with Guidant's continued problems over the summer with the recall of thousands of pacemaker and implantable defibrillators, causing many to fear that the transaction would not close. When Johnson & Johnson showed signs of wanting to back away from the original deal, Guidant sued J&J to complete it.

J&J, based in New Brunswick, N.J., said it did not feel bound by the original terms, however, because product recalls and related regulatory investigations, claims and other developments have had "a material adverse effect" on Guidant.

Since June, Guidant has recalled or issued warnings about 88,000 heart defibrillators — including its top seller, the Contak Renewal 3 — and almost 200,000 pacemakers because of reported malfunctions.

Guidant shareholders, who must approve the revised deal, will get $33.25 in cash and 0.493 share of Johnson & Johnson common stock for each share. Revised terms and a notice of a special meeting to vote on the agreement will be mailed to Guidant shareholders soon.

The companies expect the transaction to close in the first quarter of 2006.

Meanwhile, Indianapolis-based Guidant said its president and chief executive, Ronald W. Dollens, will proceed with his previously announced retirement effective immediately, and that James M. Cornelius, the company's non-executive chairman of the board, becomes chairman and interim CEO.

The Federal Trade Commission approved the acquisition Nov. 2 on the condition that Johnson & Johnson divest certain lines of drug-coated stents, and blood vessel harvesting and sewing products.

European regulators, in a separate approval, are requiring Johnson & Johnson to divest its Cordis steerable guidewires business in Europe and Guidant's Endovascular Solutions business in Europe. Johnson & Johnson is currently looking for buyers for those businesses.