Boston Scientific ($BSX) and Johnson & Johnson ($JNJ) are gearing up for a courtroom showdown, as the companies prepare for a multibillion-dollar trial over a breach-of-contract suit related to a failed bidding war for devicemaker Guidant.
As Reuters reports, a federal court judge in New York on Thursday will hear the case without a jury and decide whether Marlborough, MA-based Boston Scientific should be held liable for breaching a contract in its acquisition of Guidant and pay $5 billion in damages and interest to J&J. The two-part trial will go before U.S. District Judge Richard Sullivan and is expected to run into December as lawyers flesh out the companies' near decade-long battle.
J&J and Boston Scientific's beef dates back to 2004, when J&J struck a deal to purchase Guidant and later agreed to shell out $21.5 billion for the company. J&J said it would sell a portion of Guidant's business to Abbott Laboratories ($ABT) to clear the acquisition of antitrust hurdles, and chartered a "no-solicitation" clause that barred Guidant from seeking a better offer.
But before the merger closed, Boston Scientific swooped in with a $25 billion offer and also said it would sell assets to Abbott to ease through the deal. J&J and Boston Scientific engaged in a heated bidding war, with Boston Scientific emerging as the winner and paying $27 billion to acquire Guidant. J&J walked away with a $705 million termination fee.
In September 2006, J&J sued Guidant, Abbott and Boston Scientific for breach of contract, claiming that Guidant clued Abbott in about the asset deal, leaving the door open for Boston Scientific to move in with a better offer. Abbott has since been dismissed from the case, Reuters reports.
J&J may have a tough case ahead, as it attempts to prove that it lost money since losing out on the Guidant deal. J&J's stock has skyrocketed since the Boston Scientific/Guidant deal went through, Reuters notes, while Boston Scientific continues to deal with the fallout of its purchase--a deal Forbes deemed "arguably the second-worst ever." In 2012, the Massachusetts device giant took a $3.4 billion goodwill impairment write-off tied to the acquisition and paid out more than $30 million in October 2013 to settle the last federal claims over two of Guidant's recalled defibrillators.
Boston Scientific plans to argue on Thursday that Guidant did not knowingly violate the agreement, according to court documents seen by Reuters. Still, the case could be a boon for the company as it continues to generate upward momentum and reach its pre-Guidant heights.
- read the Reuters article