Guidant Agrees to Discuss Boston Scientific Offer
By From news reports
Guidant, the medical device maker that agreed to be acquired by Johnson & Johnson, said on Wednesday that its board of directors had agreed to discuss a rival offer from Boston Scientific. Guidant said it was prepared to provide information to Boston Scientific and enter into discussions over its $25 billion offer, made public on Monday. The board said it was not making any recommendations on the proposal. Guidant agreed last month to a reduced purchase price of $21.5 billion from J&J, whose original offer a year ago was for $25.4 billion. J&J cut its price amid safety concerns and litigation over recalls of its implantable defibrillators. A determination by Guidant that Boston Scientific’s offer is superior would force Johnson & Johnson to decide whether to raise its bid or walk away. Boston Scientific said that should it prevail, it would reimburse Guidant for a $625 million breakup fee to J&J.
“I can’t imagine why the company wouldn’t embrace this deal and abandon the J&J transaction.” said Steven Cohen, chief investment officer at Kellner DiLeo Cohen in New York.
In a statement, Boston Scientific said: “Guidant’s board has determined that our proposal is reasonably likely to lead to a superior proposal, and we are ready to begin confirmatory due diligence immediately. We expect to be in a position to sign a definitive merger agreement by the end of December, and we look forward to closing the transaction in the first quarter of 2006.”
A J&J spokesman, Jeffrey Leebaw, did not immediately return a call seeking comment on the Guidant statement.
Since the recall of faulty defibrillators in June, Guidant has become the target of lawsuits and regulatory probes. In July the company also recalled 28,000 pacemakers that were found to be subject to failure.
“J&J is locked into what it’s already done,” said John Putnam, an analyst with the Stanford Group in Boca Raton, Florida. “They really can’t raise the price, because they probably would be looked at as being weak or not being very adroit at making acquisitions.”
He said J&J may change its offer to all cash, “which might entice the Guidant shareholders, but short of that I just don’t see them raising their offer here.” Boston Scientific’s willingness to cover the $625 million breakup fee makes it irresistible for Guidant to pursue the talks, Putnam said.
Boston Scientific shares closed down 53 cents at $25.81. Johnson & Johnson’s shares were down 43 cents at $60.04. Guidant shares ended down 35 cents at $66.53.