Boston Scientific has offered $25 billion in cash and stock to purchase cardiac devicemaker Guidant, topping by roughly $3 billion Johnson & Johnson's (J&J) current bid to buy the company.
The proposed price of $72 per share represents a premium of roughly 14 percent over the $63.43 per share being offered by J&J under its revised merger agreement with Guidant, according to Boston Scientific. Boston Scientific also said its proposed deal could close in the first quarter of 2006.
"The combination of Guidant and Boston Scientific will create the world's leading cardiovascular device company accelerating diversification and growth," said Pete Nicholas, chairman of Boston Scientific. The combined company would be strongly positioned in a wide range of medical markets, and would be supported by a more diversified base of revenues and earnings, he added.
Boston Scientific also would retain Guidant's employee base, especially its dedicated sales and product development teams, said Jim Tobin, president and CEO of Boston Scientific. Under a combined company, Boston Scientific would participate in two of the largest medical device markets -- interventional cardiology and cardiac rhythm management, Tobin said. "We believe shareholders will also benefit from the upside potential resulting from a valuation of Boston Scientific that is closer to our more diversified peers."
The proposal comes less than a month after J&J announced it would pay $21.5 billion for Guidant, down from the $25.4 billion purchase price in a December 2004 merger agreement. But J&J had threatened to walk away from the deal entirely in the wake of mounting legal and regulatory problems with Guidant's implantable cardioverter defibrillators (ICDs) and pacemakers. Since last summer, Guidant has recalled or issued warnings on roughly 88,000 ICDs and nearly 200,000 pacemakers because of flaws.
Financial analysts had said the J&J/Guidant deal would position J&J as the No. 2 player in the CRM market. The deal also would have significantly bolstered J&J's competitive position in the drug-eluting stent market, analysts said. Guidant is set to launch its first drug-eluting stent, and would become the third competitor in the lucrative market. J&J and Boston Scientific are the only other firms that market drug-eluting stents.
Guidant acknowledged the receipt of the Boston Scientific proposal, but declined to comment by press time. J&J also didn't comment on the proposal by press time.
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