Boston Scientific adds twist to $25 billion Guidant offer - selling vascular business to Abbott for $3.8 billion

By E. Janene Geiss

Philadelphia, Jan. 9 - Boston Scientific Corp. submitted a definitive proposal Monday to acquire Guidant Corp. in a cash and stock deal worth $72 per Guidant share or $25 billion.

The deal is similar to the offer Boston Scientific made for Guidant in December with a new caveat: Boston Scientific is planning to sell Guidant's vascular intervention and endovascular business to Abbott Laboratories for $3.8 billion. It also would share rights to Guidant's drug-coated stent business with Abbott, according to a company news release.

The new aspect of the deal is meant to thwart any potential antitrust concerns with the acquisition, officials said.

Under terms of Boston Scientific's offer, each share of Guidant common stock will be exchanged for $36 in cash and $36 in Boston Scientific common stock, based on the average closing price of Boston Scientific common stock during the 20 consecutive trading-day period ending three days prior to Guidant's shareholder meeting to approve the transaction, the release said.

If the average closing price of Boston Scientific common stock during such period is less than $23.62, Guidant shareholders will receive 1.5241 Boston Scientific shares for each share of Guidant common stock, and if the average closing price of Boston Scientific common stock during such period is greater than $28.86, Guidant shareholders will receive 1.2474 Boston Scientific shares for each share of Guidant common stock, officials said.

Boston Scientific's offer price represents a premium of about 12% over the purchase price proposed by Johnson & Johnson, which reiterated Friday its offer to buy the company under a revised merger agreement for $33.25 per Guidant share in cash and 0.493 shares of Johnson & Johnson common stock, a deal worth about $21.5 billion.

The combined company's sales are expected to grow at a double-digit rate achieving $16 billion in sales in 2011, officials said. Adjusted earnings per share is expected to be between $1.50 and $1.66 in 2007 and $1.98 and $2.18 in 2008, officials said.

Boston Scientific said it expects to retain an investment-grade rating after the transaction closes and rapidly pay down its incremental debt with substantial free cash flow.

"The combination of Guidant and Boston Scientific will create a global leader in cardiovascular devices, accelerating diversification and growth," Pete Nicholas, chairman of Boston Scientific, said in the release.

As previously announced, Boston Scientific has received commitment letters from Bank of America NA and Merrill Lynch & Co. for the financing necessary to complete the transaction. Bear, Stearns & Co. Inc., Deutsche Bank AG New York Branch and Wachovia Bank NA also have committed to participate in the financing, officials said.

For Abbott's part, the company would take over development of the Xience product. Abbott would market it directly and license the drug-eluting stent technology and supply the product to Boston Scientific, officials said. Under the supply arrangement, Abbott said it would receive substantial payments from Boston Scientific based on sales of the drug-eluting stent product.

Under the terms of that agreement, Abbott would pay Boston Scientific $3.8 billion for Guidant's vascular business on or around the closing of Boston Scientific's acquisition of Guidant.

Abbott said it also would pay Boston Scientific milestone payments of $250 million upon FDA approval of Guidant's drug-eluting stent and an additional payment of $250 million upon a similar approval in Japan.

Abbott said it also would provide a $700 million five-year interest-bearing loan to Boston Scientific.

Abbott said it anticipates the acquisition of Guidant's vascular business would be slightly dilutive to ongoing earnings per share in 2006 and accretive thereafter.

And Abbott said it expects to incur one-time charges following the closing related to research and development, which will be specified at a later date.

The acquisition is expected to close in the first quarter of 2006, officials said.

Abbott is an Abbott Park, Ill., health care company devoted to development, manufacture and marketing of pharmaceuticals and medical products, including nutritionals, devices and diagnostics.

New Brunswick, N.J.-based Johnson & Johnson is a manufacturer and marketer of health care products.

Guidant, based in Indianapolis, develops therapies for cardiac and vascular disease.

Boston Scientific is a Natick, Mass., maker of medical devices, including heart devices.

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