INDIANAPOLIS (AP) — Johnson & Johnson (JNJ) said Wednesday that it will acquire device manufacturer Guidant (GDT) for $25.4 billion.
Under the terms of the deal, each Guidant share will be exchanged for $30.40 in cash and $45.60 in Johnson and Johnson stock. The $76 price is a 5.5% premium over Guidant's closing price of $72.05 on Wednesday.
Johnson & Johnson officials said Thursday the planned acquisition of Guidant, which makes pacemakers and cardiac defibrillators, will complement J&J's line of products and services in cardiology and medical devices.
"The combination of these businesses will enable us to bring innovative new therapies to patients and their physicians in this very important and fast growing therapeutic area," said William Weldon, chairman and chief executive of Johnson & Johnson, in a prepared statement.
Guidant shareholders and federal and overseas regulators still must approve the acquisition, which Johnson & Johnson said was the largest business deal in its 118-year history.
The transaction has an estimated net acquisition cost of $23.9 billion, based on Guidant's outstanding shares and net estimated cash on hand, J&J said in the statement.
Guidant, which was spun off by Eli Lilly in 1994, capitalized on breakthroughs in heart stents and pacemaker-defibrillator technology to become one of the world's top medical device makers.
Ronald Dollens will remain president and CEO of Guidant until the transaction has closed, which the companies said they expected to happen during the third quarter of 2005.
Dollens said he believed Guidant's patients, employees and shareholders would all benefit from the transaction.
"We think this kind of a combined entity will cause us the greatest chance of success going forward," Dollens told analysts during a Thursday conference call.
Most of Guidant's 12,000 employees work in Minnesota and California, but it also has operations in Ireland and Puerto Rico. The company employs about 150 people at its headquarters in downtown Indianapolis.
Officials from both companies said they did not expect federal regulators to raise any objects that would scuttle the deal.
Dollens said he believed the medical device industry will continue to become more competitive and that regulators would recognize that in their review.
"They have to come to the conclusion that there is ample competition, specifically in the drug-eluting stent world," he said. "We would see this thing going forward without being abated."
The deal would make J&J an industry behemoth with $45.6 billion in annual sales. The combined company's biggest competitor in the fast-growing market for stents is Boston Scientific (BSX), which had $3.48 billion in 2003 revenue.
Wall Street has been abuzz for months with talk of the negotiations.
John Putnam, a senior vice president and analyst at Stanford Financial Group in Boca Raton, Fla., questioned earlier this week what J&J would gain from acquiring Guidant.
"What's questionable is what J&J is really buying here," he said. "They're obviously buying a big franchise, a cardiac rhythm management business, a growth area obviously, but even so, it's not going to be change they're overall growth rate that much."
J&J owns a stent-producing subsidiary, Cordis, which would join Guidant as part of the new cardiovascular device unit within Johnson & Johnson, Weldon said. The unit will be named Guidant while the Cordis name will be kept for select businesses within the franchise, Johnson & Johnson.
Guidant's lucrative cardiovascular and defibrillator businesses offers J&J sales and earnings growth at a time when the health care giant's pharmaceutical business is entering a transitional period, analysts said. J&J's painkiller Duragesic and its attention deficit disorder drug Concerta both could face generic competition next year after combined sales this year expected to reach $2.7 billion.
Guidant's implantable defibrillators racked up $445 million in sales during the third quarter, and Guidant told stock analysts recently that the worldwide market for the devices grew 25% through the first nine months of this year.
J&J earned $2.34 billion on revenue of $11.6 billion in the third quarter. Guidant earned $154 million on revenue of $925 million in the quarter.
Under the terms of the deal, each Guidant share will be exchanged for $30.40 in cash and $45.60 in Johnson and Johnson stock. The $76 price is a 5.5% premium over Guidant's closing price of $72.05 on Wednesday.
Johnson & Johnson officials said Thursday the planned acquisition of Guidant, which makes pacemakers and cardiac defibrillators, will complement J&J's line of products and services in cardiology and medical devices.
"The combination of these businesses will enable us to bring innovative new therapies to patients and their physicians in this very important and fast growing therapeutic area," said William Weldon, chairman and chief executive of Johnson & Johnson, in a prepared statement.
Guidant shareholders and federal and overseas regulators still must approve the acquisition, which Johnson & Johnson said was the largest business deal in its 118-year history.
The transaction has an estimated net acquisition cost of $23.9 billion, based on Guidant's outstanding shares and net estimated cash on hand, J&J said in the statement.
Guidant, which was spun off by Eli Lilly in 1994, capitalized on breakthroughs in heart stents and pacemaker-defibrillator technology to become one of the world's top medical device makers.
Ronald Dollens will remain president and CEO of Guidant until the transaction has closed, which the companies said they expected to happen during the third quarter of 2005.
Dollens said he believed Guidant's patients, employees and shareholders would all benefit from the transaction.
"We think this kind of a combined entity will cause us the greatest chance of success going forward," Dollens told analysts during a Thursday conference call.
Most of Guidant's 12,000 employees work in Minnesota and California, but it also has operations in Ireland and Puerto Rico. The company employs about 150 people at its headquarters in downtown Indianapolis.
Officials from both companies said they did not expect federal regulators to raise any objects that would scuttle the deal.
Dollens said he believed the medical device industry will continue to become more competitive and that regulators would recognize that in their review.
"They have to come to the conclusion that there is ample competition, specifically in the drug-eluting stent world," he said. "We would see this thing going forward without being abated."
The deal would make J&J an industry behemoth with $45.6 billion in annual sales. The combined company's biggest competitor in the fast-growing market for stents is Boston Scientific (BSX), which had $3.48 billion in 2003 revenue.
Wall Street has been abuzz for months with talk of the negotiations.
John Putnam, a senior vice president and analyst at Stanford Financial Group in Boca Raton, Fla., questioned earlier this week what J&J would gain from acquiring Guidant.
"What's questionable is what J&J is really buying here," he said. "They're obviously buying a big franchise, a cardiac rhythm management business, a growth area obviously, but even so, it's not going to be change they're overall growth rate that much."
J&J owns a stent-producing subsidiary, Cordis, which would join Guidant as part of the new cardiovascular device unit within Johnson & Johnson, Weldon said. The unit will be named Guidant while the Cordis name will be kept for select businesses within the franchise, Johnson & Johnson.
Guidant's lucrative cardiovascular and defibrillator businesses offers J&J sales and earnings growth at a time when the health care giant's pharmaceutical business is entering a transitional period, analysts said. J&J's painkiller Duragesic and its attention deficit disorder drug Concerta both could face generic competition next year after combined sales this year expected to reach $2.7 billion.
Guidant's implantable defibrillators racked up $445 million in sales during the third quarter, and Guidant told stock analysts recently that the worldwide market for the devices grew 25% through the first nine months of this year.
J&J earned $2.34 billion on revenue of $11.6 billion in the third quarter. Guidant earned $154 million on revenue of $925 million in the quarter.