Guidant goes with Johnson & Johnson

CHICAGO - Medical-device maker Guidant has accepted a higher takeover offer from Johnson & Johnson of US$24.2 billion ($34.7 billion), ignoring a higher offer of US$24.8 billion from Boston Scientific.

It marks the third time J&J had revamped its offer for Guidant, which has suffered from product recalls and litigation over the safety of its heart devices.

J&J's new offer is valued at US$71 a share, up from its earlier bid of US$23 billion, or US$68 a share. It sweetened the bid by increasing the cash component to US$40.52.

"This agreement with J&J provides significant financial value and certainty for shareholders," said Guidant chairman and chief executive James Cornelius.

Just two months ago, J&J had said Guidant's product woes had materially damaged the value of the company. Yet, J&J was sucked into a bidding war after Boston Scientific made higher and higher bids.

Both companies want Guidant's share of the US$10 billion market for devices that help regulate heart beats.

"Guidant should be appreciative of the fact that Boston Scientific has helped raise shareholder value [for them]," said Steve Brozak, at WBB Securities. Brozak expects Boston Scientific to take some time to evaluate its next move, which could include bypassing Guidant's management and taking its bid directly to investors.

Boston Scientific, which makes cardiovascular devices and products used in oncology and urology, lifted its bid last week to US$73 a share, up from US$72, and made other concessions to try to address Guidant's concerns about antitrust scrutiny and the timing of the deal's completion.

It had set a deadline of 2100 GMT Friday (0900 Saturday, NZ time) for Guidant to respond.

In an odd twist, Boston Scientific issued a news release saying it would extend by two hours the expiration of its offer.

About 20 minutes later, the company withdrew the statement without an explanation.

Sources familiar with the situation said Boston Scientific yanked the deadline-extension when it realised Guidant was planning to use that time to negotiate a new deal with J&J.

In the end, Guidant stayed with its original partner rather than taking the risk that the higher bid from Boston Scientific might take longer to close and run into problems with antitrust regulators.

J&J had originally agreed to buy Guidant in December 2004, for US$25.4 billion.

- REUTERS