J&J-Guidant Deal Teetering

The Federal Trade Commission on Wednesday cleared the way for Johnson & Johnson to acquire the struggling medical device maker Guidant Corp., provided the companies shed several product lines.

But J&J quickly indicated it may not complete the $25.4 billion deal, saying it was talking with Guidant about restructuring terms of the proposed buyout because of recent product recalls and regulatory investigations at Guidant.

"Johnson & Johnson believes that these events have had a material adverse effect on Guidant, and, as a result, that it is not required under the terms of the merger agreement to close the Guidant acquisition," the J&J statement said.

A message seeking comment was left with Guidant spokesman Steve Tragash.

The FTC said J&J would have to divest its business of making drug-eluting stents and devices used in bypass graft surgery. J&J must also end its agreement to distribute certain products used in heart surgery, the FTC sad.

"The consent order announced by the Commission today preserves competition in the U.S. markets for three important medical device products," Susan Creighton, director of the FTC's Bureau of Competition said in a statement.

New Brunswick, N.J.-based Johnson & Johnson and Guidant announced the deal in December, but since then Guidant has been troubled by repeated recalls of pacemakers and defibrillators.

Since June, Guidant has recalled or issued warnings about 88,000 heart defibrillators, including its top seller, the Contak Renewal 3, and almost 200,000 pacemakers because of reported malfunctions. The company faces a slew of lawsuits from patients and shareholders, as well as a reported criminal investigation by the U.S. Food and Drug Administration.

Johnson & Johnson shares rose 10 cents to $62 in morning trading on the New York Stock Exchange, while Guidant shares fell 10 cents to $63.