Guidant Corp. has agreed to merge with Johnson & Johnson in a deal valued at $24.2 billion. Under J&J’s third revised offer, the company will pay $71 for each Guidant share, consisting of $40.52 in cash and 0.493 shares of common stock.
The deal is valued at slightly less than the $24.8 billion rival bid from Boston Scientific Corp., which would offer $73 per share, $36.50 in cash and $36.50 in common stock.
“This agreement with Johnson & Johnson provides significant financial value and certainty for shareholders,” said Guidant chairman and chief executive officer James Cornelius, in a statement. “Together with Johnson & Johnson, we will have the resources to continue to build upon the existing Guidant businesses in our pursuit of meaningful innovations to address cardiovascular disease.”
According to The Wall Street Journal, Guidant decided to accept the lower bid because it was concerned about antitrust reviews of Boston Scientific’s offer, which includes a plan to sell Guidant’s stent business to Abbott Laboratories for $4.3 billion.
In December 2004, J&J initially agreed to buy Guidant for $25.4 billion in cash and stock. It backed away from that deal after Guidant disclosed problems with its defibrillators that led to the recall of certain models.
In a strange twist, on Friday afternoon Boston Scientific fired off a press release saying it would extend its offer by two hours. A short time later it issued another, instructing readers to disregard the earlier announcement. According to Reuters, Boston Scientific cancelled its plans to extend the deadline when it realized Guidant was planning to use that time to negotiate a new deal with J&J.
The wire service also noted that hedge fund Elliott Associates LP, which owns about 3 million Guidant shares, announced its opposition to the new deal. “We view Boston Scientific’s $73-per-share offer as superior to J&J’s $71 offer,” Ivan Krsticevic, a senior portfolio manager, told Reuters. “As long as Boston Scientific’s offer remains available to Guidant or its shareholders, we will not support the J&J transaction.”
The Journal reported that several shareholders are unhappy that Guidant would be required to pay a break-up fee to J&J, recently increased to $675 million, if Boston Scientific wins the bidding war.