Boston Scientific sweetens pot in bid for Guidant
Published: Wednesday, January 18, 2006 at 6:01 a.m.
Last Modified: Tuesday, January 17, 2006 at 8:48 p.m.
BOSTON - Medical device maker Guidant Corp. abandoned its support for a $24.2 billion acquisition bid from Johnson & Johnson in favor of Tuesday's far richer $27.2 billion offer from Boston Scientific Corp.
AT A GLANCE: Rivalry not over?
The shift came after Guidant's board had twice rejected higher offers from Boston Scientific in favor of a J&J proposal that Guidant had said offered a speedier route to completion after more than 13 months of contentious dealmaking.
But Boston Scientific on Tuesday morning increased the stakes again by offering a price more than $2 billion richer than its previous bid last Thursday. Boston Scientific also sought to sway Guidant's board in its favor by negotiating new terms in a third-party deal that will raise more short-term cash for Boston Scientific to complete a Guidant acquisition.
Guidant said in a brief statement that its board determined "that Boston Scientific's revised offer to acquire Guidant is superior to the terms of the company's current merger agreement with Johnson & Johnson." The statement did not elaborate.
Boston Scientific had set a 5 p.m. EST deadline for the Guidant response, which was announced about 30 minutes before that deadline.
In a short statement, Johnson & Johnson said it "considers the proposal from Boston Scientific to be a highly dilutive and leveraged transaction based on extremely aggressive business projections and, as such, one that will not provide $80 per share in value to Guidant shareholders. The company will consider its alternatives under the existing merger agreement with Guidant."
Shareholders are due to vote on J&J's offer Jan. 31. But with Indianapolis-based Guidant declaring Boston Scientific's bid superior, J&J now has five business days to counter it under the terms of its agreement with Guidant. Boston Scientific's offer will remain open for formal acceptance by Guidant until Jan. 25.
Some industry analysts have said Guidant's board could have faced a shareholder revolt if it continued to back J&J's offer, which has already cleared by antitrust regulators.
The big price increase Tuesday from Natick, Mass.-based Boston Scientific led some observers to speculate the bid was a last-ditch attempt to trump J&J.
The bidding war was sparked Dec. 5 when Boston Scientific sought to derail a year of contentious dealmaking between Guidant and J&J with an unsolicited offer of $24.6 billion. New Brunswick, N.J.-based J&J first bid for Guidant in December 2004, but recalls and regulatory investigations involving Guidant products led J&J to cut its original $25.4 billion offer to $21.5 billion.
Boston Scientific raised its bid to $25 billion last Thursday, prompting J&J to respond Friday with a $24.2 billion offer that Guidant's board accepted, citing that deal's greater certainty and its clearance of an antitrust review.
Boston Scientific's latest bid amends a separate deal announced Jan. 8 to address antitrust issues and fears that a regulatory review could slow any deal. The new proposal raises the price that Abbott Laboratories Inc. will pay for Guidant's vascular business from $3.8 billion to $4.1 billion.
J&J and Boston Scientific, rivals in the market for drug-coated heart stents, are dueling for Guidant's business in implantable defibrillators and pacemakers, a fast-growing $10 billion business in which neither suitor is a player.
Associated Press Writer Carol Druga and AP Business Writers Wallace Witkowski and Linda Johnson contributed to this report.
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