Johnson & Johnson to Acquire Guidant for $63/Share

Johnson & Johnson (JNJ) has finally agreed to buy Guidant (GDT) for $21.5 billion. This works about to about $63.08 a share, which is far less than the original offer of $25.4 billion, or $76 a share.
Honestly, this is a rotten deal for J&J and I was hoping they could walk away from it. My guess is that the legal troubles would simply have been too much. The merger was nearly sunk as Guidant had to recall thousands of pacemakers. According to Eliot Spitzer, Guidant’s strategy was to not tell anyone about the defective pacemakers and maybe no one would notice.
Once Plan A didn’t work out, Guidant settled on Plan B—beg for a lower price. J&J wanted to lower the price to $60 a share, Guidant wanted $69 a share. Plan C was to sue so they settled on $63 which will be about half in cash and half in stock.
I’m very nervous for Johnson & Johnson. This is one of the great companies on Wall Street. The company has raised its dividend for the last 43 straight years. Sales have increased for 72 straight years. Now they’re going to merge with a company that they just had a very public fight with. This is not good.

Posted by on November 15th, 2005 at 9:18 am


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