Guidant sues J&J to force completion of buyout
Wednesday, November 2nd 2005, 10:45 am
By: News On 6
INDIANAPOLIS (AP) _ Medical device maker Guidant Corp. sued Johnson & Johnson on Monday, seeking to force the health care company to complete a $25.4 billion acquisition of Guidant which has been shaken by a series of recalls.
Indianapolis-based Guidant also reported sharply lower earnings for the third quarter on Monday.
Its shares tumbled 4.5 percent in early trading Monday, while J&J shares slipped.
The lawsuit, which was filed in U.S. District Court for the Southern District of New York, comes after Friday's deadline passed for completing the deal as specified under the agreement the two companies reached Dec. 15, 2004.
It followed days of speculation that J&J would walk away from the deal after it warned last Wednesday negotiations between the companies had stalled and might not continue. J&J said it was no longer obligated to complete the deal because of the series of recalls that have shaken Guidant in recent months.
Guidant had said J&J was legally obligated to complete the transaction, and analysts predicted the showdown might end up in court.
J&J, based in New Brunswick, N.J., had no immediate comment.
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.
Last Wednesday, the Federal Trade Commission conditionally approved the acquisition.
On Thursday, New York Attorney General Eliot Spitzer sued Guidant for fraud, accusing it of not telling doctors about a potentially fatal flaw in some of its defibrillators.
Guidant also said Monday that its profit dropped 57 percent to $65.4 million, or 20 cents per share, in the three months ended Sept. 30 from $153.6 million, or 48 cents per share, a year ago. The latest figure includes costs of $28 million, or 6 cents per share, related to regulatory actions on its devices. Excluding items, the company said it would have earned 32 cents per share in the latest quarter.
Revenue fell 14 percent to $795 million from $924.5 million.
Analysts surveyed by Thomson Financial were looking for third-quarter earnings of 49 cents per share on sales of $884.2 million.