J&J Seeks Billions in Trial Over Decade-Old Bidding War

Johnson & Johnson asked a judge to rule that it’s owed $7.2 billion by Boston Scientific Corp. at the end of a trial over its failed effort a decade ago to acquire heart device-maker Guidant Corp.

J&J alleges that Guidant violated their merger agreement to pursue a more lucrative offer by Boston Scientific. Guidant found itself in a “difficult situation” after agreeing to a $63-a-share bid from Johnson & Johnson and had to find a way to “keep that ball in the air,” Harold Weinberger, an attorney representing Johnson & Johnson, argued Wednesday.

“They had to find a way and they did find a way,” Weinberger told U.S. District Judge Richard Sullivan in Manhattan, who is hearing the trial without a jury.

David Boies, an attorney representing Guidant, said there’s no evidence that Johnson & Johnson executives had determined that Guidant breached their agreement by accepting the Boston Scientific bid in company e-mails and documents from the weeks before the company won the bidding war. Even if Johnson & Johnson were liable, the company hasn’t shown it lost out on profits it would have made if the deal was completed, Boies said.

“They would have lost money rather than made money,” Boies said. “The plaintiffs’ damages, even if they proved a breach, are zero.”

At Risk

Of the two companies, Boston Scientific, with a market capitalization of about $19 billion, has more at risk in the case. It generated $7.1 billion in revenue in 2013. Johnson & Johnson, with a market cap of $285 billion, has 10 times Boston Scientific’s annual sales.

Boston Scientific won the acquisition in a bidding war, buying Guidant for $27.5 billion, with Guidant paying J&J a $705 million termination fee. Boston Scientific also sold Guidant’s heart stent business to Abbott Laboratories to avoid antitrust issues the merger would otherwise have caused.

The Guidant acquisition has been called one of the worst in history. Boston Scientific, which took on $10 billion in debt to buy Guidant, wrote down $2.7 billion tied to the deal in 2008. J&J’s damages from the failed transaction are $4.35 billion plus interest, for a total of $7.2 billion, it claims.

Sullivan didn’t say when he will rule in the case.

Confidential Information

John P. “Sean” Coffey, another attorney representing J&J, said Boston Scientific wouldn’t have done the deal without an agreement to sell Guidant’s heart-stent business and that Abbott wouldn’t have agreed to participate if it hadn’t gotten the confidential information and its identity kept secret. “Here we have an income-producing asset that was taken away from Johnson & Johnson,” Coffey argued.

J&J, based in New Brunswick, New Jersey, sued in September 2006, claiming Guidant, based in Marlborough, Massachusetts, broke their merger agreement by disclosing confidential business information to Abbott.

Abbott and Boston Scientific were also accused by J&J of improperly interfering with its deal with Guidant. The following year, a federal judge in Manhattan dismissed Abbott from the case and narrowed J&J’s claims to a breach-of-contract dispute.

The case is Johnson & Johnson v. Guidant Corp., 06-cv-07685, U.S. District Court, Southern District of New York (Manhattan).

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