Boston Scientific makes surprise offer for Guidant
Bid beats Johnson & Johnson offer New suitor has Canadian stent partner
INDIANAPOLIS— Boston Scientific Corp. has made an unexpected, $25 billion ( U. S.) takeover offer for troubled medical-device maker Guidant Corp., over $3 billion more than Johnson & Johnson agreed to pay for Guidant last month. Boston Scientific, which makes heart devices, offered in a letter to Guidant’s chairman to pay a combination of cash and stock worth about $72 per Guidant share. Boston Scientific said that is nearly 14 per cent above Friday’s value of J& J’s revised cash-and-stock deal for Guidant.
Boston Scientific’s Canadian partner on stents is Angiotech Pharmaceuticals Inc. of Vancouver. The offer comes nearly a year after J&J said it would buy the Indianapolis medical-device maker for $ 25.4 billion. But J&J cut its offer by nearly $4 billion after Guidant started a series of product recalls, and Guidant management accepted the lower price last month. Boston Scientific executives said the prospect of entering the lucrative $ 10 billion market for implantable pacemakers and defibrillators by purchasing Guidant outweighs the legal risks posed by the company’s recent problems. “We understand there have been some recent issues, but we believe they are manageable,” Boston Scientific chief operating officer Paul LaViolette said in an interview.
Indianapolis-based Guidant said it had received the proposal, and the board would consider it.
“ Guidant will have no further comment on this matter at this time,” the company said in a statement. A Johnson & Johnson spokesman could not be reached for comment.
Boston Scientific said it’s prepared to sell Guidant’s stent business to satisfy regulators, but wants to retain some shared rights in Guidant’s drug- coated stent program, which has not yet brought a product to market. Boston Scientific has one of the best- selling drug- coated stents on the market in Taxus, which competes with the Cypher stent made by J&J’s Cordis Corp. unit. Stents are metal- mesh devices surgically inserted to keep coronary arteries propped open after surgery to clear blockages.
Jeffries & Co. analyst Ryan Rauch said Guidant remains attractive despite the recalls, perhaps even more so to Boston Scientific, where profits have dwindled recently.
“ 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. John Putnam, an analyst with Stanford Group Co., said Guidant must give the new offer serious consideration. Not only is Boston Scientific offering more money, but such an acquisition would be more like a merger of equals. A potential pitfall for Guidant would be the cost of any breakup penalty in the deal with J& J. In the original deal, the cost was $750 million, but the companies have not yet filed an amended agreement with regulators.
“ Strategically, it’s a better fit for Guidant being with Boston Scientific than being with J& J,” Putnam said. J&J also would be hard pressed to enter a bidding war after rancorous negotiations that resulted in a lower offer for Guidant, he said.
“ It’s going to be tough for J&J to make another offer that’s close to Boston Scientific.” Johnson & Johnson and Guidant renegotiated their deal when J&J considered pulling its original offer of $76 a share, made last December, after Guidant suffered through the recall of thousands of implantable heart devices over the summer.
Since June, Guidant has recalled or issued warnings about 88,000 heart defibrillators — including top seller Contak Renewal 3 — and almost 200,000 pacemakers because of reported malfunctions.
Guidant had filed a federal lawsuit to force J& J, based in New Brunswick, N. J., to complete the original takeover agreement.