Guidant Now Backs Boston Scientific’s Bid
Medical device maker Guidant Corp. abandoned its support for a $24.2-billion acquisition bid from Johnson & Johnson on Tuesday after receiving a $27.2-billion offer from Boston Scientific Corp.
The shift came after Guidant’s board had twice rejected higher offers from Boston Scientific in favor of J&J; proposals that Guidant had said offered a speedier route to completion after more than 13 months of contentious deal making.
But Boston Scientific on Tuesday morning increased the stakes again by offering a price more than $2 billion higher than its previous bid -- a far higher increase than it had made in previous rounds. Boston Scientific also added other enticements and sought to sway Guidant’s board in its favor by negotiating new terms in a third-party deal that would raise more cash for Boston Scientific to complete a Guidant acquisition.
Guidant said in a statement that its board determined that Boston Scientific’s revised $80-a-share offer “is superior to the terms of the company’s current merger agreement with Johnson & Johnson.” The statement did not elaborate.
New Brunswick, N.J.-based Johnson & Johnson said in a statement that it believed Boston Scientific’s proposal would hurt the earnings potential of the combined company and leave it saddled with too much debt. J&J; also said the proposal was based on “extremely aggressive business projections.”
“The company will consider its alternatives under the existing merger agreement with Guidant,” J&J; said.
Natick, Mass.-based Boston Scientific said, “We look forward to working together to complete the transaction.”
Shareholders are 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, until the end of business Jan. 24, to counter it under terms of its agreement with Guidant.
The offer from Boston Scientific will remain open for formal acceptance by Guidant until Jan. 25.
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.
Analyst Dhulsini De Zoysa of SG Cowen & Co. said J&J; had the financial capacity to raise its offer from its $71 a share. But she said J&J; was unlikely to go above the $76-a-share proposal it had presented in December 2004 before product recalls and safety warnings at Guidant led J&J; to reduce its offer.
“A solution that might satisfy the Guidant board as well as shareholders is to offer $76 a share with a higher cash component, or offer to pay all in cash,” De Zoysa said.
Guidant’s support of Boston Scientific’s bid as superior came after Guidant shares rose $5.38, or 7.6%, to $76.22. Shares of Boston Scientific fell $1.30, or 5.2%, to $23.90, and J&J; shares dropped 54 cents, 0.9%, to $61.28.
