EC approves $24 billion merger

The European Commission has approved under the EU Merger Regulation the planned $24 billion acquisition by US healthcare group Johnson & Johnson of its competitor Guidant.

The European Commission has approved under the EU Merger Regulation the planned $24 billion (around € 18 billion) acquisition by US healthcare group Johnson & Johnson (J&J) of its competitor Guidant, a US company specialised in cardiovascular medical products, subject to conditions.

In particular the parties must divest either J&J or Guidant Endoscopic Vessel Harvesting products (EVH), plus Guidant’s EEA endovascular business and J&J’s EEA Steerable Guidewires business.

In light of the commitments given by J&J, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a significant part of it.

Competition Commissioner Neelie Kroes said “I wanted to ensure that consumers would not have to pay higher prices for the life-saving medical devices produced by these two companies and that any changes to the competitive structure in these markets would not be to the detriment of consumer welfare. I am therefore satisfied that the commitments given by J&J allow the Commission to approve this merger”.

Both J&J and Guidant are active worldwide in the development, production and sale of vascular medical devices. Their products are used to treat vascular diseases; both in the heart (coronary arteries) and in peripheral parts of the human body.

The firms are direct competitors in respect of a number of products and are both among a limited number of leading companies on the market for these products in Europe and worldwide. The Commission opened an in-depth market investigation because it had serious concerns that the proposed transaction, as notified, would have impeded effective competition within the EEA.

The investigation focused on three major areas: coronary drug eluting stents (DES) and accessories, endovascular stents and accessories used in peripheral arteries, and devices used in cardiac surgery.

Coronary drug eluting stents are expandable wire tubes coated with a drug which are placed in an occluded coronary artery in order to remove the plaque and support the walls of the vessel. In this fast-growing market, there are currently only two major suppliers worldwide, J&J and Boston Scientific, plus a number of imminent entrants, including Guidant. In its investigation the Commission had to assess whether by eliminating Guidant as a potential competitor, the merger would remove the major competitive constraint in the DES market.

The investigation has revealed that, while Guidant would likely have been one of the key players in the market for DES, other new entrants, primarily Medtronic and Abbott, will also be likely to exert a significant competitive constraint, compensating for the loss of competition resulting from J&J’s acquisition of Guidant.

However, in the case of stents used in peripheral parts of the body, the Commission found that the merger would give rise to competition concerns in the EEA given that both J&J and Guidant are among the leading suppliers in Europe, the market is very concentrated and there are high entry barriers.

The Commission also found that the combination of J&J’s and Guidant’s interests would have impeded competition in two small markets for cardiovascular devices (coronary guidewires and endoscopic vessel harvesting systems in cardiac surgery). The commitments offered by J&J mean that competition will not be significantly affected by the transaction.