"J&J is looking to ensure that they've got the ability to increase their growth quarter to quarter," according to Steve Brozak of WBB Securities. "Their further expansion into the medical devices market provides them with that," he says. Brozak and WBB don't own J&J or Guidant shares.

Darretta expects the Guidant acquisition to add 3% to J&J's average annual growth rate in 2006 through 2008.

Regulators cleared J&J, based in New Brunswick, N.J., to acquire Guidant on Nov. 2, but the transaction has been in question ever since Guidant was hit in recent months by a series of recalls of its pacemakers and implanted defibrillators.

After J&J said last month it would "consider alternatives" under its agreement, Guidant's shares fell amid speculation that the acquisition plans would be canceled. Guidant later sued J&J to keep it at the bargaining table. According to J&J, the suit has been dismissed.

The 17% haircut in J&J's offer reflects its estimate of the damage to Guidant's enterprise value in the wake of its much-publicized product headaches. In announcing it was considering alternatives to the deal earlier this month, J&J said it "continues to view the previously announced product recalls at Guidant and the related regulatory investigations, claims and other developments as serious matters affecting both Guidant's short-term results and long-term outlook.

"Johnson & Johnson believes that these events 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 the Guidant acquisition," the company said.

Simultaneously with the merger agreement, Guidant announced the departure of CEO Ronald Dollens, who postponed his initial retirement plans to advise on the deal. Chairman James Cornelius has taken over as CEO in the interim.

At least one analyst suggests that former Dollens was a vocal opponent to Guidant accepting a lower acquisition bid.

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