17 Feb 2015 Cases

High Stakes Merger Litigation Settles Favorably After Compass Lexecon Expert Testifies

1 minute read


Professor Bradford Cornell recently testified in a high-stakes trial involving Johnson & Johnson’s lawsuit against Guidant Corporation. In the lawsuit, Johnson & Johnson accused Guidant of breaching terms in a merger agreement between the two companies when another firm, Boston Scientific, emerged as a competitive bidder for and ultimately acquired Guidant. Johnson & Johnson claimed that the alleged breach caused over $7 billion in damages because it was unable to acquire Guidant at the price specified in the agreement.

Professor Cornell testified that Johnson & Johnson’s estimate of damage was unreliable. For example, one of Johnson & Johnson’s damage theories claimed that but-for the breach it would have acquired Guidant at the price specified in the agreement and would have received its estimated investment value that included expected merger-related synergies. Professor Cornell explained that Johnson & Johnson’s ability to acquire Guidant at the price specified in the agreement was not reasonably certain given the emergence of a higher unsolicited bid from Boston Scientific. He also pointed out that Johnson & Johnson’s estimates of investment value were highly sensitive to modeling assumptions and that expected merger-related synergies often do not materialize.

While awaiting the Court’s decision, the case settled on favorable terms. After the settlement announcement, Boston Scientific’s stock price closed at $16.68, an increase of over 12% from the previous day’s close. Compass Lexecon worked with John Gueli and Daniel Laguardia of Shearman & Sterling LLP and William Ohlemeyer and Jack Wilson of Boies, Schiller & Flexner LLP. Professor Cornell was supported by Andrew Roper, John Haut, and Keming Liang.

A new version of Compass Lexecon is available.