Counsel, start your time-clocks.
As has been well-reported, Guidant has sued Johnson & Johnson for specific performance of J&J’s $25.4 billion acquisition. J&J will almost certainly assert that its obligation is void under the merger agreement’s “material adverse effect” clause, and, specifically, will argue that the clause has been triggered by Guidant’s messy encounters with state and federal regulators over its heart stents.
Bill Sjostrom at the Business Law Prof Blog has been all over this looming fight.
Back in September, he started questioning the deal’s continued viability. In October, he put up a great post on the MAE at issue in the (then) potential litigation. He argued that NY AG Spitzer’s lawsuit against Guidant may strengthen JJ’s claim here. Finally, he broke news of the suit here.
Obviously, I do not know how this will turn out. But doesn’t it seem that J&J could have protected itself against this type of risk with more precision? Isn’t regulatory action the number two legal problem medical device makers potentially face, after patent claims?