NEW YORK (TheStreet) -- Boston Scientific Corp. (BSX) could have to pay excess of $5 billion in damages to Johnson & Johnson (JNJ) relating to a nine-year-old battle to acquire the device maker Guidant, depending on the outcome of a trial set to begin in New York on Thursday, Reuters reports.
A federal judge will decide if Guidant, through its successor, Boston Scientific, a medical device maker, should be held responsible for breaching its merger contract with Johnson & Johnson, Reuters said.
In 2004 Johnson & Johnson and Guidant made a deal to merge at a price of $21.5 billion, which included a no-solicitation clause that was intended to keep Guidant from seeking out other potential offers, Reuters added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
Before the Johnson & Johnson deal closed, Boston Scientific stepped in with a $25 billion offer, and said it would sell assets to Abbott Laboratories (ABT) , an arrangement Johnson & Johnson had also made, Reuters noted.
Johnson & Johnson believes Guidant provided due diligence to Abbot as it considered the Boston Scientific offer. Court papers show that Boston Scientific is planning to argue Guidant didn't knowingly violate the agreement, Reuters said.
Separately, TheStreet Ratings team rates BOSTON SCIENTIFIC CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate BOSTON SCIENTIFIC CORP (BSX) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BSX's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BOSTON SCIENTIFIC CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BOSTON SCIENTIFIC CORP continued to lose money by earning -$0.08 versus -$2.87 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus -$0.08).
- This stock has managed to rise its share value by 12.40% over the past twelve months. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- BSX's debt-to-equity ratio of 0.63 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.81 is weak.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, BOSTON SCIENTIFIC CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BSX Ratings Report