Boston Scientific beats J&J to acquire Guidant for $27 billion
25 January 2006
Boston Scientific, the gloabal maker of interventional medical devices like hear stents has won the bidding war over its larger rival Johnson & Johnson to acquire cardiac and vascular device maker, Guidant Corporation, with a $27-billion bid.
Bringing an end to the month-long takeover battle for Guidant, Natick, Massachusetts-based Boston Scientific, with a market capitalisation of about $20 billion, emerged triumphant today after Johnson & Johnson threw in the towel and refused to raise its bid higher than $24.2 billion.
With Johnson & Johnson throwing in the towel today, Guidant declared Boston Scientific's offer "clearly superior" and accepted the $27 billion bid.
Boston Scientific and Guidant also announced today that the board of directors of Guidant had unanimously endorsed the company's merger agreement of 17 January with Boston Scientific based on the latter's proposal made on the same day.
Boston Scientific had proposed acquiring all the outstanding shares of Guidant for a combination of cash and stock worth $80 per Guidant share, or approximately $27 billion.
Johnson & Johnson had proposed acquiring Guidant on 15 December 2004 for $76 a share, valuing the Indianapolis, Indiana-based Guidant at $25.4 billion, but lowered its bid by 15 per cent to $21.5 billion in November 2005 due to Guidant issuing a warning for nine different models of pacemakers sold from 1997 to 2000.
In July 2005, Guidant issued safety advisories and recalls for 170,000 pacemakers that it had earlier introduced.
But on 5 December 2005, Boston Scientific made a surprise, unsolicited $24.6-billion offer to acquire Guidant at $72 per share.
On 11 January 2006, Johnson & Johnson made a counteroffer of $23.2 billion, still lower that its original 2004 bid, which the Guidant board accepted.
The next day, Boston Scientific raised its bid to $25 billion, followed the next day by Johnson & Johnson increasing its own ofer, but below Boston's, to $24.2 billion.
On 17 January, Boston Scientific once again raised its offer to $27.2 billion or $80 per share and agreed to sell Guidant's vascular intervention business to Abbott Laboratories for $6.4 billion in cash upon completion of the merger, to secure antitrust approvals for the acquisition.
The $6.4 billion comprises $4.1 billion in purchase price for Guidant's vascular intervention business, a loan of $900 million, and Abbotts agreement to acquire $1.4 billion of Boston Scientific common stock.
Guidant said today that prior to entering into the merger agreement with Boston Scientific, it had terminated its merger agreement with Johnson & Johnson and paid it $705 million as termination fee.
''Our $80 per share offer for Guidant is compelling, said Pete Nicholas, chairman of Boston Scientific. ''We are providing Guidant shareholders with certainty of completion, significant upside potential and substantially more value today than the Johnson & Johnson transaction. By any objective measure, our offer is clearly superior to Johnson & Johnson.''
Boston Scientific expects the Guidant acquisition to propel it as one of the global leader in cardiovascular medical devices with a combined revenue in 2006 of nearly $9 billion.