02.18.15
Marlborough, Mass.-based Boston Scientific Corp. has agreed to pay $600 million to Johnson & Johnson (JNJ) to settle a long-running breach of merger lawsuit over Boston Scientific’s 2005 acquisition of rival Guidant.
JNJ claimed in the lawsuit that Guidant, for which Boston Scientific paid $27 billion, broke the terms of an earlier contract to be acquired by JNJ by providing information to Boston Scientific. JNJ reportedly had made a deal to buy Guidant for $21.5 billion. The New Brunswick, N.J.-based company claimed its damages from the failed merger were $4.35 billion plus interest, for a total of $7.2 billion.
The Guidant acquisition was widely considered by Wall Street to be a disaster for Boston Scientific as it left the company laden with debt and dealing with a host of Guidant product recalls. Many analysts believed JNJ had dodged a bullet by losing Guidant.
In a research note to investors a couple hours after the settlement news was announced, Leerink Partners analyst Danielle Antalffy said she doesn’t believe the financial burden will severely impact the company's bottom line, and will likely lead to higher share prices.
“Our sense is that while investors did not expect a worst-case, $7 billion + scenario to play out, $600 million is a much smaller sum than most had expected,” she said. “And more importantly, this settlement removes an overhang that we believe had kept many investors on the sidelines.”
Boston Scientific said it expects to record a pre-tax litigation-related charge of about $600 million in its fourth quarter 2014 results.
JNJ claimed in the lawsuit that Guidant, for which Boston Scientific paid $27 billion, broke the terms of an earlier contract to be acquired by JNJ by providing information to Boston Scientific. JNJ reportedly had made a deal to buy Guidant for $21.5 billion. The New Brunswick, N.J.-based company claimed its damages from the failed merger were $4.35 billion plus interest, for a total of $7.2 billion.
The Guidant acquisition was widely considered by Wall Street to be a disaster for Boston Scientific as it left the company laden with debt and dealing with a host of Guidant product recalls. Many analysts believed JNJ had dodged a bullet by losing Guidant.
In a research note to investors a couple hours after the settlement news was announced, Leerink Partners analyst Danielle Antalffy said she doesn’t believe the financial burden will severely impact the company's bottom line, and will likely lead to higher share prices.
“Our sense is that while investors did not expect a worst-case, $7 billion + scenario to play out, $600 million is a much smaller sum than most had expected,” she said. “And more importantly, this settlement removes an overhang that we believe had kept many investors on the sidelines.”
Boston Scientific said it expects to record a pre-tax litigation-related charge of about $600 million in its fourth quarter 2014 results.