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The Federal Trade Commission is on track to approve Johnson & Johnson Inc.’s $76 per share, $24.7 billion acquisition of Guidant Corp. shortly after the first week of September. Arbs and others following the deal predict the merger will win approval of European Union antitrust regulators by Sept. 6. The FTC won’t sign off by then, but approval could come “soon after,” said one source tracking the deal. EU regulators aren’t expected to place conditions on the merger’s approval, and the FTC is expected to go lighter than arbs originally anticipated. The FTC now is expected to order J&J to license a technique used for implanting stents in arteries. Companies interested in licensing the technology are said to include Abbott Laboratories, Medtronic Inc. and Italy’s Sorin Group SpA. It had been expected that carotid stent products — used for treating blockages in neck arteries — would be part of the divestiture package, but it appears they are not covered. Those products are based on older technology that is in declining use in the United States although still prevalent in Europe. “Divestiture of the stent is not on the table now,” said one source tracking the deal. The FTC apparently believes the rise of newer products alleviates the potential concentration in the stent business. Medtronic has entered the European market, reducing concern among regulators there as well. One “minor” product line apparently will have to be divested, but arbs following the review did not know what that might be. It remains unclear whether licensing deals for the stent delivery procedure must be finalized before the FTC will sign off on the merger. Since FTC chairwoman Deborah Majoras took the agency’s helm last year, she has made streamlining the merger review process a priority. Consequently, she and other FTC staff have said the agency will be more willing to accept licensing deals rather than divestitures as a solution to concentration concerns. The agency, she said, will also be more willing to allow companies to close their deals before finalizing required divestitures and licensing arrangements. The spread on Guidant has come in from nearly 6 percent Aug. 12 to about $3.30, or 4.4 percent, late in the session Thursday, Aug, 18 on anticipation that antitrust approval could come soon with few conditions. That equates to a 37 percent annualized return if the deal closes Sept. 30. The real risk now is that J&J cuts the price because of the recall of Guidant defibrillators and pacemakers. It will not be clear until next month what impact that has had financially and on market share. J&J at press time had not commented on the possibility of revised terms. Copyright �2005 TDD, LLC. All rights reserved.

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