Boston Scientific To Pay J&J $600 Million To Settle Guidant Suit--2nd Update

By George Stahl 

Boston Scientific Corp. agreed to pay Johnson & Johnson $600 million to settle a long-running lawsuit related to the 2006 acquisition of heart-device maker Guidant Corp. for $27 billion.

J&J had sought more than $7 billion in damages after accusing Guidant of breaching their merger agreement by going with the higher offer from Boston Scientific.

As a result of the settlement announced Tuesday, J&J has agreed to dismiss its lawsuit without acknowledgment of liability by Guidant. Boston Scientific also agreed not to bring patent infringement or other claims related to certain J&J stent products.

Boston Scientific said it would include a charge of $600 million with its fourth-quarter results. On Feb. 4, Boston Scientific reported fourth-quarter earnings of $87 million, or six cents a share, on revenue of $1.89 billion.

In 2006, Boston Scientific made a last-minute bid that snatched away Guidant from J&J.

J&J had worked 18 months to land Guidant, seeking an entree into the big market for devices that regulate errant heart rhythms. J&J had provided an opening for Boston Scientific when it lowered its original offer after Guidant ran into product-quality problems. But when its bid reached $24 billion, few expected upstart Boston Scientific to swoop in with a takeout offer.

While Boston Scientific may have outmaneuvered J&J in the takeover battle, it has struggled since amid a heavy debt load caused by the deal, increased competition in the heart market and the economic downturn last decade.

The company's stock, which was in the mid-$20s in the months leading up to the Guidant deal, has only recently reached $15 after trading several years below it. Shares, though, surged Tuesday following news of the settlement, rising nearly 12% to $16.59 in after-hours trading.

"We view this resolution as a significant positive for [Boston Scientific], lifting what has been a major overhang over the past few months," J.P. Morgan analyst Michael Weinstein said in a note Tuesday.

J&J, meanwhile, trades above $100 after being around $60 in early 2006. Shares of J&J added 11 cents to $100.55 following the news.

In an emailed statement, J&J noted that the agreement was reached after evidence related to the Guidant lawsuit was presented at a trial and before the court rendered its decision. J&J added that, including the breakup fee, it has received a total of $1.305 billion related to the Guidant deal.

Write to George Stahl at [e-mail]

Access Investor Kit for Boston Scientific Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US1011371077

Access Investor Kit for Johnson & Johnson

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US4781601046

Subscribe to WSJ: http://online.wsj.com?mod=djnwires