BOSTON (AFX) -- Johnson & Johnson said Wednesday that it's been holding talks with Guidant Corp. over a possible restructuring of the terms of their pending merger in light of recent recalls of Guidant products.
Because the recalls have had a material impact on Indianapolis-based Guidant , J&J said it isn't required to close on the planned deal, valued at $25.4 billion.
Shares of Guidant lost nearly 6% at their lowest level of Wednesday's session.
"Johnson & Johnson continues to view the previously announced product recalls at Guidant and the related regulatory investigations, claims and other developments as serious matters affecting both Guidant's short-term results and long-term outlook," J&J said in a statement.
The Dow Jones Industrial Average component added that it "believes that these events have had a material adverse effect on Guidant, and, as a result, that it is not required under the terms of the merger agreement to close the Guidant acquisition."
J&J's proposed acquisition of Guidant, first announced in December 2004, has been under considerable pressure in recent months due to Guidant's recall of several of its cardiac devices. As a result, speculation has been growing that J&J will move to either restructure the deal at a cheaper price or might even pull the plug entirely.
On Wednesday, J&J confirmed talks with Guidant about a possible restructuring. However, the discussions "have not resulted in any agreement," the company said.
"Johnson & Johnson cannot assure that the companies will resume those discussions or, if discussions do resume, whether they will be able to reach agreement on revised terms that would allow Johnson & Johnson to proceed with the transaction," the company added.
J&J's remarks came on the heels of a Federal Trade Commission announcement that it had cleared the merger, subject to divestitures designed to preserve market competition in three medical-device areas.
Specifically, the FTC said that it has approved the acquisition of Guidant provided that J&J license its lucrative drug-coated stent technology to a third party.
The commission said the parties involved have agreed that Abbott Laboratories , which has a significant medical- device business, should be the recipient of the drug-coated stent license.
The FTC has also asked that J&J divest itself of its endoscopic-vessel harvesting products, used in coronary artery bypass surgery. The agency said J&J has agreed to sell the line to Datascope.
The FTC also wants J&J to terminate its distribution agreement with Novare Surgical System Inc. for that company's proximal anastomotic assist devices, which are also used in coronary artery by-pass surgery.
Shares of Guidant were down 4.1% recently, partially rebounding from their session low at $59.50, while J&J and Abbott shares were fractionally lower.
This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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Because the recalls have had a material impact on Indianapolis-based Guidant , J&J said it isn't required to close on the planned deal, valued at $25.4 billion.
Shares of Guidant lost nearly 6% at their lowest level of Wednesday's session.
"Johnson & Johnson continues to view the previously announced product recalls at Guidant and the related regulatory investigations, claims and other developments as serious matters affecting both Guidant's short-term results and long-term outlook," J&J said in a statement.
The Dow Jones Industrial Average component added that it "believes that these events have had a material adverse effect on Guidant, and, as a result, that it is not required under the terms of the merger agreement to close the Guidant acquisition."
J&J's proposed acquisition of Guidant, first announced in December 2004, has been under considerable pressure in recent months due to Guidant's recall of several of its cardiac devices. As a result, speculation has been growing that J&J will move to either restructure the deal at a cheaper price or might even pull the plug entirely.
On Wednesday, J&J confirmed talks with Guidant about a possible restructuring. However, the discussions "have not resulted in any agreement," the company said.
"Johnson & Johnson cannot assure that the companies will resume those discussions or, if discussions do resume, whether they will be able to reach agreement on revised terms that would allow Johnson & Johnson to proceed with the transaction," the company added.
J&J's remarks came on the heels of a Federal Trade Commission announcement that it had cleared the merger, subject to divestitures designed to preserve market competition in three medical-device areas.
Specifically, the FTC said that it has approved the acquisition of Guidant provided that J&J license its lucrative drug-coated stent technology to a third party.
The commission said the parties involved have agreed that Abbott Laboratories , which has a significant medical- device business, should be the recipient of the drug-coated stent license.
The FTC has also asked that J&J divest itself of its endoscopic-vessel harvesting products, used in coronary artery bypass surgery. The agency said J&J has agreed to sell the line to Datascope.
The FTC also wants J&J to terminate its distribution agreement with Novare Surgical System Inc. for that company's proximal anastomotic assist devices, which are also used in coronary artery by-pass surgery.
Shares of Guidant were down 4.1% recently, partially rebounding from their session low at $59.50, while J&J and Abbott shares were fractionally lower.
This story was supplied by MarketWatch. For further information see www.marketwatch.com.
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
© 2005 AFX News
