Boston Scientific, Guidant sign merger agreement valued at $27 billion

By Angela McDaniels

Seattle, Jan. 25 - Guidant Corp.'s board of directors has unanimously approved and entered into the merger agreement provided by Boston Scientific Corp. on Jan. 17, according to a news release.

"Shareholders will benefit from the significant upside potential of the combined company," Boston Scientific chairman Pete Nicholas said in the release. The companies predicted that revenue will nearly reach $9 billion in 2006.

Under the agreement, Boston Scientific will acquire all the outstanding shares of Guidant for a combination of cash and stock worth $80 per Guidant share, or roughly $27 billion.

Each share of Guidant common stock will be exchanged for $42 in cash and $38 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 the closing date.

If the average closing price of Boston Scientific common stock during this period is less than $22.62, Guidant shareholders will receive 1.6799 Boston Scientific shares for each share of Guidant common stock.

If the average closing price of Boston Scientific common stock during this period is greater than $28.86, Guidant shareholders will receive 1.3167 Boston Scientific shares for each share of Guidant common stock.

In total, Guidant shareholders will own roughly 36% of the combined company, according to the release.

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

The transaction is subject to customary closing conditions, including clearances under the Hart-Scott-Rodino Antitrust Improvements Act and the European Union merger control regulation, as well as approval of Boston Scientific and Guidant shareholders.

Boston Scientific expects to complete the transaction by the end of the first quarter of 2006.

As previously announced, Boston Scientific will divest Guidant's vascular intervention and endovascular businesses to Abbott Laboratories and share rights to Guidant's drug-eluting stent program.

Under the agreement with Abbott, Boston Scientific will receive $6.4 billion in cash from Abbott on the closing date of the Guidant transaction. This amount consists of $4.1 billion in purchase price for the Guidant assets, a loan of $900 million and Abbott's agreement to acquire $1.4 billion of Boston Scientific common stock.

Boston Scientific and Guidant believe that Boston Scientific's agreement with Abbott will enable Boston Scientific and Guidant to rapidly secure antitrust approvals for the proposed transaction.

Prior to entering into the agreement with Boston Scientific, Guidant terminated its merger agreement with Johnson & Johnson.

In accordance with the terms of their agreement, Boston Scientific will reimburse Guidant for the termination fee of $705 million payable to Johnson & Johnson.

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

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

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

Abbott is health care products company based in an Abbott Park, Ill.

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