Guidant Sues J&J To Force Buyout

In a file photo Dr. William J. Groh, a cardiologist who is the director of the pacemaker and implanted defibrillator clinic at Indiana University's medical school holds a Guident Contak Renewal 3 defibrillator in his office in Indianapolis Friday, June 24, 2004.
AP
Guidant Corp. sued Johnson & Johnson to force the company to complete a $24.5 billion acquisition of Guidant. Friday's deadline passed for completing the deal, amid speculation that J&J would walk away.

Medical device maker Guidant Corp. sued Johnson & Johnson on Monday, seeking to force the health care company to complete a $25.4 billion acquisition of Guidant which has been shaken by a series of recalls. J&J said it would vigorously oppose the suit.

Indianapolis-based Guidant also reported sharply lower earnings for the third quarter on Monday.

Its shares tumbled 4.5 percent in morning trading Monday, while J&J shares slipped.

The lawsuit, which was filed in U.S. District Court for the Southern District of New York, comes after Friday's deadline passed for completing the deal as specified under the agreement the two companies reached Dec. 15, 2004.

It followed days of speculation that J&J would walk away from the deal after it warned last Wednesday negotiations between the companies had stalled and might not continue. J&J said it was no longer obligated to complete the deal because of the series of recalls that have shaken Guidant in recent months.

Guidant had said J&J was legally obligated to complete the transaction, and analysts predicted the showdown might end up in court.

J&J, based in New Brunswick, N.J., said Monday it is not required by the December 2004 agreement with Guidant to close the deal because product recalls and related regulatory investigations, claims and other developments have had "a material adverse effect" on Guidant.

"Johnson & Johnson will vigorously oppose the lawsuit and take all necessary action to enforce its rights under the merger agreement," the J&J statement said.