By George Stahl
Boston Scientific Corp. agreed to pay Johnson & Johnson $600
million to settle a long-running lawsuit related to the 2006
acquisition of heart-device maker Guidant Corp. for $27
billion.
J&J had sought more than $7 billion in damages after
accusing Guidant of breaching their merger agreement by going with
the higher offer from Boston Scientific.
As a result of the settlement announced Tuesday, J&J has
agreed to dismiss its lawsuit without acknowledgment of liability
by Guidant. Boston Scientific also agreed not to bring patent
infringement or other claims related to certain J&J stent
products.
Boston Scientific said it would include a charge of $600 million
with its fourth-quarter results. On Feb. 4, Boston Scientific
reported fourth-quarter earnings of $87 million, or six cents a
share, on revenue of $1.89 billion.
In 2006, Boston Scientific made a last-minute bid that snatched
away Guidant from J&J.
J&J had worked 18 months to land Guidant, seeking an entree
into the big market for devices that regulate errant heart rhythms.
J&J had provided an opening for Boston Scientific when it
lowered its original offer after Guidant ran into product-quality
problems. But when its bid reached $24 billion, few expected
upstart Boston Scientific to swoop in with a takeout offer.
While Boston Scientific may have outmaneuvered J&J in the
takeover battle, it has struggled since amid a heavy debt load
caused by the deal, increased competition in the heart market and
the economic downturn last decade.
The company's stock, which was in the mid-$20s in the months
leading up to the Guidant deal, has only recently reached $15 after
trading several years below it. Shares, though, surged Tuesday
following news of the settlement, rising nearly 12% to $16.59 in
after-hours trading.
"We view this resolution as a significant positive for [Boston
Scientific], lifting what has been a major overhang over the past
few months," J.P. Morgan analyst Michael Weinstein said in a note
Tuesday.
J&J, meanwhile, trades above $100 after being around $60 in
early 2006. Shares of J&J added a penny to $100.45 following
the news.
Write to George Stahl at george.stahl@wsj.com
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