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Guidant Votes on Deal Today

Posted on: Friday, 31 March 2006, 18:00 CST

By Jeff Swiatek, The Indianapolis Star

Mar. 31--After a turbulent year involving a corporate bidding war, numerous product recalls and national media attention, Indianapolis-based Guidant Corp. goes before shareholders today in the next-to-last step of a sale of the medical device maker.

The sale will end the 12-year corporate life of Guidant, which was spun off from Indianapolis drug maker Eli Lilly and Co. in 1994.

Shareholders who vote at 10 a.m. in Indianapolis and Boston will have to cast their ballots knowing the deal remains contingent on winning approval from two sets of government regulators.

Antitrust approval is needed in both the United State and Europe, and may not be forthcoming for two weeks or even longer.

That will stretch out the drama that began in December 2004. Guidant's board originally agreed to sell out to health products giant Johnson & Johnson. But after Guidant ran into a series of recalls last year of its heart defibrillators -- its most valuable product line -- Johnson & Johnson's ardor for Guidant cooled and Boston Scientific won over the Guidant board with a higher offer.

Guidant shareholders are expected to overwhelmingly approve Boston Scientific's offer of $80 a share, $42 of which is cash.

"I can't imagine shareholders would vote against it. No one's come forward to make a counter-offer, so they better take this," said John Putnam, a medical device analyst for the investment firm Stanford Group Co. in Florida.

Guidant's stock is held largely by institutional investors, such as mutual funds and banks. The company's shareholder meeting will be Downtown in the Bank One Tower, where Guidant has its 170-person headquarters. Most voting will occur electronically or by mail.

Approval of the deal also is needed from Boston Scientific's shareholders. They will vote on the terms and issuance of new stock.

To overcome regulatory resistance to a merger of two rivals that hold strong market positions in heart stents, Boston Scientific has proposed to sell Guidant's stent and related businesses to Abbott Laboratories for $4.1 billion.

The terms of the Guidant acquisition allow Boston Scientific to pay less if its stock sinks below an average closing price of $22.62 during a 20-day period preceding the closing. But that appears unlikely to happen. Boston Scientific's stock price closed Thursday at $23.32, up 7 cents. Guidant's stock price rose 5 cents, to $78.05.

Boston Scientific almost certainly will have to ante up a late fee to Guidant shareholders that's payable if the purchase doesn't happen before Saturday. That fee is expected to range from $13.4 million to $31.3 million, depending on how quickly the closing occurs.

Boston Scientific, based in Natick, Mass., outbid New Jersey-based Johnson & Johnson in January to win the right to buy Guidant, whose board initially agreed in December 2004 to be acquired by J&J for $76 a share.

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GDT, LLY, JNJ, BSX, JPM, ABT,

Source: The Indianapolis Star

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