European Union Approves Johnson & Johnson's Purchase of Guidant Corp. with Conditions

Strategic Insights -

The European Union's approval of Johnson & Johnson's proposed purchase of Guidant Corp. with conditions has left the final regulatory hurdle as the U.S. antitrust approval. The deal, valued at $25 billion, was agreed upon in December and approved by Guidant shareholders in April. However, the European Commission's scrutiny of the merger for five months has resulted in Johnson & Johnson agreeing to divest certain businesses to ensure fair competition. The approval came as a surprise to some analysts, who had expected the sale of competing heart stent businesses.

Key Takeaways:

  • Johnson & Johnson's purchase of Guidant Corp. was approved by the European Union with conditions, including the divestiture of certain business units to ensure fair competition.
  • The deal, valued at $25 billion, was agreed upon in December and approved by Guidant shareholders in April.
  • Johnson & Johnson has agreed to sell off its cardiovascular guide-wire business in Europe, as well as Guidant's endovascular business, if the deal goes through.
  • The company must also sell off either its or Guidant's endoscopic vessel harvesting business, which sells devices to remove veins from a leg or other area to use in a diseased heart.
  • The businesses to be divested are a small part of both companies' overall sales, according to Johnson & Johnson spokesman Jeff Leebaw.
  • EU antitrust regulators did not demand the sale of any competing heart stent businesses, despite concerns about market share.
  • Guidant's recent string of product woes, including recalls of its leading brands of heart defibrillators, had some analysts speculating that Johnson & Johnson would renegotiate a lower price for the acquisition.
  • The Food and Drug Administration is reviewing Guidant's manufacturing operations as a result of the recent defibrillator and pacemaker recalls.

Statistics:

  • $25 billion: The value of the proposed purchase of Guidant Corp. by Johnson & Johnson.
  • $30.40: The price in cash offered for each Guidant share.
  • $45.60: The price in Johnson & Johnson stock offered for each Guidant share.
  • 55 cents: The decline in Guidant's stock price.
  • $71.10: The current price of Guidant's stock.
  • 6.4%: The percentage below the acquisition offer price that Guidant's stock currently trades at.

Sources:

  • The Indianapolis Star
  • Johnson & Johnson
  • Guidant Corp.
  • European Commission
  • Food and Drug Administration
  • The Associated Press
  • Bloomberg News
  • Knight Ridder/Tribune Business News