GDT Lower on Fears Johnson & Johnson Could Walk Away From Deal

Guidant Corp (NYSE: GDT) arbitrage spread on the $76 Johnson & Johnson (NYSE: JNJ) offer is now about $13 or +20%. The market is pricing in substantial risk that JNJ will re-price the deal or walk away after Guidant sent warning letters advising physicians of component failure with various ICDs. Some sell side analysts see downside as low as $50, $13 or 20% below the current price. So at the current price of $63 you are looking at equal risk up or down. This will be one to watch as more information develops.

Medtronic Inc (NYSE: MDT) and St Jude Medical Inc (NYSE: STJ) are both up on the Guidant news, as investors think they will benefit from the company�s woes.

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