Troubled Guidant drew a $25 billion offer from medical-device rival Boston Scientific, topping Johnson & Johnson's watered-down bid...
INDIANAPOLIS — Troubled Guidant drew a $25 billion offer from medical-device rival Boston Scientific, topping Johnson & Johnson’s watered-down bid by more than $3 billion.
Guidant’s once-flagging stock rose $6.16, or nearly 10 percent, to close at $67.98 amid Wall Street’s speculation of a bidding war.
But market analysts said that J&J, which did not return repeated phone calls for comment, may not want Guidant badly enough to spend billions more for the maker of pacemakers, defibrillators and other devices which has been plagued by a series of recalls and by related regulatory investigations.
It was just three weeks ago that Guidant accepted a revised $21.5 billion proposal from J&J and stopped suing the health-care products company to close on a year-old acquisition offer of $25.4 billion.
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Boston Scientific, whose products include the top-selling cardiac stent Taxus, offered Guidant a combination of cash and stock worth about $72 per Guidant share — a 16 percent premium over Friday’s close. The prospect of entering the lucrative $10 billion international market for implantable pacemakers and defibrillators outweighed Guidant’s recent legal and regulatory woes.
“The primary driver of our proposal is to increase Boston Scientific’s diversification and grow our cardiac-rhythm management business,” Boston Scientific’s chief operating officer, Paul LaViolette, said in a telephone interview.
Guidant’s original deal with J&J bogged down amid a series of recalls and warnings affecting nearly 200,000 pacemakers and about 88,000 defibrillators since June.
Dozens of shareholder and product-liability lawsuits have ensued, costing Guidant more than a quarter of its value. Its stock plummeted to a low of $55.26 last month.
“We understand there have been some recent issues, but we believe they are manageable,” LaViolette said. “We are experienced with these issues.”
Guidant’s strengths outweigh its problems for Boston Scientific, which has seen its profits dwindle recently, Jefferies analyst Ryan Rauch said.
“Guidant would shore up Boston Scientific’s 2008 pipeline, if they’re willing to take significant dilution to their shares in the short term,” Rauch said.
Rauch said he did not expect Guidant’s shareholders would embrace J&J’s offer over Boston Scientific’s, given the premium and the frayed relations between Guidant and J&J. Rauch said J&J was not likely to sweeten its offer.
“There’s no love lost between Guidant and J&J,” Rauch said. “I believe J&J will not come back into the dance at a higher price.”
Observers said Guidant’s problems have been overblown.
“I think once it all blows over, Guidant will continue to be the leader in the fields of pacemakers and defibrillators,” said Jacob Shani, chairman of the Cardiac Institute at Maimonides Medical Center in New York.
Boston Scientific has faced its own problems, including a voluntary recall announced after the close of markets Friday of 18,000 vena cava filters, devices that are implanted in a vein that carries blood to the heart from the lower body. A $600 million legal settlement led to a third-quarter loss of $269 million, and it also has had to contend with a federal inspection that found manufacturing problems.
Guidant issued a terse statement saying its board would consider the Boston Scientific offer and that the company had no further comment.
Richard Langan, a merger expert and a partner with the law firm Nixon Peabody in New York, said that under the original agreement with J&J, once Guidant’s board determines it has received a better offer, J&J has five business days to match it.
The companies have not yet filed an amended agreement with regulators.
A potential pitfall for Guidant would be the cost of any breakup penalty in its deal with J&J. The original deal set the cost at $750 million.
Boston Scientific stock lost 98 cents to end at $26.35. J&J shares fell 16 cents, to close at $61.05.