Boston Scientific's improved $80 per share offer accepted by Guidant

By E. Janene Geiss

Philadelphia, Jan. 17 - Boston Scientific Corp. upped its offer Tuesday to acquire Guidant Corp. to $80 per share, or $27 billion, from its last revised offer worth $73 per Guidant share or $25 billion.

"Our $80 per share offer for Guidant is compelling," Pete Nicholas, chairman of Boston Scientific, said in a statement.

So compelling that Guidant's board released a statement Tuesday, saying it has determined the Boston Scientific offer is superior to an acquisition agreement it has signed with Johnson & Johnson.

Boston Scientific and Johnson & Johnson have engaged in a bidding war to acquire Guidant that has gained momentum over the past two weeks.

"We are providing Guidant shareholders with certainty of completion, significant upside potential and substantially more value today than the Johnson & Johnson transaction. By any objective measure, our offer is clearly superior to Johnson & Johnson's," Nicholas added.

The last offer made late Friday by Johnson & Johnson, which has a signed merger agreement with Guidant, was for $71 a share or $24.2 billion in fully diluted equity value.

Guidant shareholders are scheduled to vote on the Johnson & Johnson deal at a special meeting Jan. 31.

Under the terms of the agreement, Guidant must wait five business days, or until Jan. 25, before it may change its recommendation of the Johnson & Johnson merger or terminate the merger agreement with Johnson & Johnson and enter into a merger agreement with Boston Scientific, officials said.

Boston Scientific said its offer will remain open for acceptance by Guidant until 4 p.m. ET on Jan. 25.

Under terms of Boston Scientific's latest offer, Boston Scientific said it will acquire all of the outstanding shares of Guidant for $80 per share, $42.00 in cash and $38.00 in Boston Scientific common stock, subject to a collar.

That represents a premium $3.3 billion, or $9 per share, over the purchase price proposed to be paid by Johnson & Johnson, based on the closing price of Johnson & Johnson common stock on Friday, Boston Scientific officials said in the release.

With the Boston Scientific deal, Guidant shareholders would own about 36% in the combined company.

The offer also includes an expanded collar that provides more certainty to Guidant shareholders and interest payments for Guidant shareholders if the transaction does not close by the end of the first quarter of 2006, officials said.

The bottom of the collar has been adjusted around the stock portion of the merger consideration by $1 from $23.62 to $22.62, which is about 10% below the closing price of Boston Scientific stock on Friday.

The top of the collar remains $28.86, officials said.

The timing of the collar has been moved from just prior to the date of the Guidant shareholders meeting until just prior to the closing date, officials said.

If the closing of the transaction does not occur by March 31, the $80 per share price would be increased by $0.0132 in cash for each day between April 1 and the date of closing, which represents an annual interest rate of 6%, officials said.

The Boston Scientific deal includes selling Guidant's vascular intervention and endovascular business to Abbott Laboratories. That offer also has been revised, according to a company news release.

The initial selling price for the business was $3.8 billion along with shared rights to Guidant's drug-coated stent business. The amended deal with Abbott, also announced Tuesday, calls for Abbott to pay Boston Scientific $4.1 billion, officials said.

As part of the Abbott deal, the amount of a loan that Abbott has agreed to make to Boston Scientific will increase to $900 million from $700 million with an interest rate of 4%.

Abbott also has agreed to purchase $1.4 billion of Boston Scientific common stock, about 56 million shares, contingent upon the closing of the Guidant acquisition. This would represent about 4% of the combined company.

In total, Boston Scientific said it should receive $6.4 billion in cash from Abbott on or around the closing date of the Guidant transaction. This amount includes $4.1 billion in purchase price and the remainder in equity and a loan, officials said.

Boston Scientific said it would expect to complete the transaction by the end of the first quarter, the release said.

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

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.

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