Boston Scientific makes firm $25B offer for Guidant, but J&J confident of its deal

Having already said that it would make a counter offer to health care major Johnson & Johnson's reduced $21.5 billion takeover bid for US pacemaker and defibrillator-maker Guidant, on January 8 (a Sunday) Boston Scientific submitted a definitive proposal to acquire the device firm (Marketletter December 12, 2005). This is in the form of equal cash and stock worth $72.00 per share, or an aggregate of $25.0 billion.

As of January 6, the J&J proposal was valued at $64.11 per Guidant share. The latter's board of directors has said that it will evaluate all aspects of the offer from Boston, with the assistance of its investment bankers, JP Morgan Chase and Morgan Stanley together with its outside counsel. Boston's offer represents a premium of around 12% over the purchase price proposed to be paid by J&J under the revised merger agreement, based on the latter's closing price on January 6. In addition, Boston put in place a financial mechanism that ensures Guidant shareholders $72.00 a share in value, even if the former's shares should move 10% either way.

For its part, J&J has reaffirmed that it expects to consummate the Guidant acquisition immediately following a favorable vote of the latter's shareholders, which is due January 31.