Johnson & Johnson says Guidant deal could be off - 13 WTHR Indianapolis

Rich Van Wyk/Eyewitness News

Indianapolis, Nov. 2 - Billions of dollars are at stake for stockholders of both companies. Johnson & Johnson, a manufacturer of pharmaceuticals and other healthcare products, is now questioning whether the much smaller Guidant Corporation is worth the $25 billion price tag. It's looking to renegotiate.

Gerry Dick of Inside Indiana Business says, "'If we can't renegotiate this deal we are going to call it off.' That indeed is a significant development."

Since the deal was struck in December Guidant has recalled or warned users of hundreds of thousands of its defibrillators and pacemakers because of reported malfunctions.

The company is under federal investigation and facing numerous lawsuits.

Despite the problems, Guidant claims Johnson & Johnson is obligated to complete the deal.

"The strategic rational for combining the two companies," President and CEO Ronald Dollens insists in a prepared statement, "is as strong today as when we entered into the merger agreement."

Some analysts believe Johnson & Johnson needs the merger to make up for its slipping prescription drug sales and that Guidant needs a partner.

Dick believes, "Going forward in an industry where innovation and capitol, a lot of money is needed, it makes sense to be part of a bigger player."

If the deal doesn't go through as written, analysts fear long and expensive legal battles, corporate bloody noses band aids can't fix.