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
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.
For details of the 17 January Boston Scientific offer see its
For details of the Johnson & Johnson and Guidant 13 January agreement see