Guidant has folded. Johnson & Johnson’s aggressive tactics left the medical devices group little choice but to accept a significant price cut for selling the company. That leaves approval of the revised agreement by Guidant’s shareholders as the last remaining obstacle. But while its investors might take a dim view of J&J’s bullying, they would be ill-advised to reject the new deal.

At least among investors, Guidant’s reputation has clearly suffered from the recall of several implantable heart-devices. The need to find a new chief executive would hardly help restore confidence, if the J&J deal were yet to fall through. Other potential trade-buyers would probably wait to get a clearer idea of the longer-term impact on the business.

The revised terms, moreover, are not all bad news for Guidant. Admittedly, the total consideration is just over $64 a share or almost 15 per cent below what the original terms suggested. But the cash component has risen from $30.4 to $33.25 a share, leaving Guidant’s shareholders less exposed to disappointments at J&J.

The deal will force J&J to make several disposals. This is likely to strengthen the position of rivals, notably Abbott Laboratories. At least, J&J has saved $3.8bn on a full price for what has already turned out to be a pretty risky business. That gives it scope for further acquisitions to help underpin the aggressive growth assumptions already underpinning its shares. But while its own investors will surely applaud its determination, boards of potential targets might be a little less keen after Guidant.

Get alerts on Industrials when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Comments have not been enabled for this article.

Follow the topics in this article