Bidding war pushes Guidant value to $27.2bn as it faces another lawsuit

19 January 2006

Boston Scientific Corporation has increased its offer for Guidant Corporation to $80 per share, or approximately $27 billion. The bid consists of $42.00 in cash and $38.00 in Boston Scientific common stock.

On 11 January Guidant Corporation and Johnson & Johnson announced that they had reached agreement over Johnson & Johnson acquiring Guidant for $23.2 billion. The boards of directors of both companies unanimously approved the revised Johnson & Johnson offer and the Guidant board of directors recommended that Guidant shareholders vote in favour of the revised merger agreement at a January 31 shareholder meeting.

This offer was raised to $24.2bn ($71/share) on 13 January following an improved offer from Boston Scientific on 12 January of $73 per share.

On 17 January Guidant Corporation announced that its Board of Directors has determined that Boston Scientific's revised offer was superior to the terms of the Company's current merger agreement with Johnson & Johnson.

Under the terms of Guidant's merger agreement with Johnson & Johnson, Guidant must wait five business days, or until January 25, 2006, before it may change its recommendation of the Johnson & Johnson merger or terminate the merger agreement with Johnson & Johnson and enter into a merger agreement with Boston Scientific.

The Boston Scientific offer included an agreement with Abbott which would inject some cash and reduce the risk of antitrust moves against a combined Boston Scientific and Guidant. Under the terms of this agreement, Abbott would pay Boston Scientific $4.1 billion to acquire Guidant's vascular business. Abbott would pay Boston Scientific milestone payments of $250 million at U.S. Food and Drug Administration approval of Guidant's drug-eluting stent, and an additional payment of $250 million upon a similar approval in Japan. Abbott would also provide Boston Scientific with a five-year, $900 million interest-bearing loan.

Abbott has also agreed to purchase $1.4 billion of Boston Scientific common stock (approximately 56 million shares), contingent upon the closing of the Guidant acquisition. This would represent approximately 4 percent of the combined company.

Johnson & Johnson said that it considered 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."

Some analysts on Wall Street see Abbott's involvement as a move to acquire medical devices capability and that it could ultimately take over Boston Scientific if its attempts on Guidant fall through (see the Reuters news article on the issue — in new window). Boston Scientific's offer remains open for acceptance by Guidant until 4 pm on January 25, 2006.

Meanwhile, Guidant faces more trouble over deaths from patients with its implanted defibrillators. The Indianapolis Star reported in December that Guidant had announced five more deaths since the recall of 109,000 devices in June (see the news article — in new window). Also, The New York Times, according to Reuters, has filed a lawsuit in a Texas court to access documents that may show Guidant knew its implantable heart defibrillators had a potentially fatal flaw before selling them.

More information

For details of the 17 January Boston Scientific offer see its press release

For details of the Johnson & Johnson and Guidant 13 January agreement see the full press release.

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