Boston Scientific Offers $25 Billion for Guidant
Boston Scientific Corp. on Monday made a surprise offer to buy medical-device maker Guidant Corp. for about $25 billion, trumping an offer from Johnson & Johnson.
The deal would give Boston Scientific access to the $10-billion market for implantable devices that help regulate heartbeats -- such as pacemakers and defibrillators. They were the main drivers in Johnson & Johnson’s original $25.4-billion offer for Guidant.
Safety concerns and litigation over Guidant’s heart products led Guidant to agree to a reduced bid of $21.5 billion -- 15% less than the original offer -- from Johnson & Johnson.
The lower price spurred Boston Scientific to make a rival bid, company executives said, and could force Johnson & Johnson to walk away from a takeover announced a year ago.
“This is a phenomenal move. They’re literally telling Johnson & Johnson to put up or shut up,” said Mark Landy, an analyst at Susquehanna Financial Group. He called the offer a “welcome holiday gift for Guidant.”
Boston Scientific, based in Natick, Mass., is offering $72 a share, nearly 14% over the $63.43 offered under the revised deal between Guidant and Johnson & Johnson. It is also a 16% premium over Guidant’s closing stock price Friday.
Guidant said it would consider the new bid. Johnson & Johnson executives could not be reached for comment.
Boston Scientific competes with the larger Johnson & Johnson in the lucrative market for stents, devices used to open clogged heart arteries. But a period of slowing growth has weighed on stock prices.
A deal with Indianapolis-based Guidant would give Boston Scientific access to the high-growth market for implantable heart defibrillators, pitting it against Medtronic Inc. and St. Jude Medical Inc., Guidant’s two chief rivals in cardiac rhythm management.
Guidant shares rose $6.16 to $67.98, Boston Scientific shares fell 98 cents to $26.35 and Johnson & Johnson stock fell 16 cents to $61.05.
To speed regulatory approval of the deal, Boston Scientific would have to sell Guidant’s vascular intervention and endovascular businesses.
Boston Scientific Chief Operating Officer Paul LaViolette said the company was undaunted by the lost market share and legal fallout related to Guidant’s recalled heart devices -- two issues that Johnson & Johnson used to lower its price for Guidant.
Boston Scientific said it hoped to see the deal close in the first quarter of 2006, assuming an agreement is reached by year-end. The company said it had factored a $625-million breakup fee into the transaction.
Boston Scientific said it believed that the deal would reduce cash earnings per share in 2006 and 2007 but would start earning in 2008. It also expects the combination to yield about $200 million in annual cost savings.
