Ending a weeklong standoff, Johnson & Johnson agreed Tuesday to acquire the struggling medical-device manufacturer Guidant for $21.5 billion, about 15 percent...

Share story

INDIANAPOLIS — Ending a weeklong standoff, Johnson & Johnson agreed Tuesday to acquire the struggling medical-device manufacturer Guidant for $21.5 billion, about 15 percent less than its initial offer last year.


The deal will help J&J beef up its medical-device division, but the company could inherit a hornet’s nest of legal problems related to recalls of Guidant pacemakers and implantable defibrillators that sapped patient and physician confidence in the company’s devices.


The deal could bring patients better heart devices, possibly at a lower cost, experts said.


If the revised acquisition is approved by Guidant shareholders early next year, J&J would buy the company for $63.08 a share, about $4 billion less than its earlier $25.4 billion, or $76-per-share, offer.


“They got one hell of a discount,” said Jerry Reisman, a financial legal adviser with the Garden City, N.Y., law firm Reisman, Peirez and Reisman. “They believe that’s certainly enough money to cover any litigation costs and any potential awards that may come in the future.”


James Cornelius, Guidant’s chairman and interim chief executive officer, said the new price “appropriately reflects the business challenges we have experienced in this period.”


Guidant shares jumped $4.75, or 8.2 percent, to close at $62.50, while Johnson & Johnson shares rose $2.32, or 3.8 percent, to end at $62.83.


The deal, which was originally expected to close in the third quarter, was delayed after Guidant recalled thousands of pacemakers and implantable 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.


Dozens of lawsuits have been filed by angry patients and shareholders since this summer’s announcements.


Guidant also faces a reported criminal investigation by the U.S. Food and Drug Administration. Late last month the U.S. District Attorney’s office in Boston and Minneapolis issued separate subpoenas seeking documents about Guidant’s devices. The company also has been sued for fraud by New York Attorney General Eliot Spitzer.