J&J claims that the recent recalls have had a material adverse effect on Guidant, and, as a result, that it is not required under the terms of the merger agreement to close its acquisition of the company.
However, Guidant has informed J&J that it believes the companies remain legally obligated to complete the transaction.
Ronald Dollens, president and CEO of Guidant commented, “recent product and communications issues have certainly had an impact on our business in the near-term. However, we believe that the fundamentals of our business are strong and our markets and products have attractive prospects for growth.”
Mr Dollens went on to say that the future success of the companies does not depend on the transaction, but the strategic rationale for combining the two companies is still “as strong today as when we entered into the merger agreement.”
Unless the companies can come to a revised agreement, it now seems likely that the outcome of the transaction will be concluded in court.