News Feature | November 24, 2014

J&J Seeks $7.2 Billion From Boston Scientific Over Guidant Deal

By Jof Enriquez,
Follow me on Twitter @jofenriq


A New York federal court recently commenced a trial initiated by Johnson & Johnson against Boston Scientific for $7.2 billion worth of damages and interest over a botched deal to acquire the medical device manufacturer Guidant nearly a decade ago.

J&J claims that Guidant reneged on a proposed merger with J&J when Guidant agreed to a Boston Scientific acquisition after a bidding war escalated, according to a Reuters report. Guidant allegedly violated their contract with J&J by giving due diligence to Abbott, which then allowed Boston Scientific to buy Guidant for $27 billion in 2006, well above the $21 billion offer put in place by J&J.

“To be blunt about it, Guidant cheated ‒ and then it lied to Johnson & Johnson so Johnson & Johnson would not discover what Guidant had done,” J&J counsel Harold Weinberger said in opening statements before U.S. District Judge Richard Sullivan in Manhattan federal court, per Reuters.

Boston Scientific’s lawyers countered that Guidant’s actions did not constitute a willful breach of contract and that the company should not be held liable. Attorney William Ohlemeyer said in court that J&J ‒ the world’s largest healthcare company ‒ is better off without Guidant, because the deal “would have resulted in a multibillion-dollar loss for J&J,” according to a Bloomberg article.

Boston Scientific’s acquisition of Guidant proved to be a failure according to most industry observers, as Boston Scientific had to take out a hefty $10 billion loan to close the deal. Moreover, the company’s shares have dropped by 40 percent since acquiring Guidant, according to Bloomberg. It could prove to be even more costly for Boston Scientific, as Judge Sullivan could award J&J the $7.2 billion in damages. That would represent over 42 percent of Boston Scientific’s market capitalization, which is currently worth $17.1 billion.

Guidant lost a motion for a summary judgment back in July, but Boston Scientific said then that it would defend itself at trial, according to a recent Med Device Online story. Some observers thought that a settlement could happen, given the stakes, but the trial commenced as J&J wanted. The non-jury trial will run through November 25, and will resume December 15.