All M&A eyes are on healthcare giant Johnson & Johnson, which has until Sunday, Jan. 22, to make a counteroffer for Guidant Corp., which on Jan. 17 accepted an $80-per-share bid from Boston Scientific Corp.
Whoever wins by overpaying — Boston Sci's whopper if accepted will be dilutive to earnings until at least 2010 — the real winner may turn out to be Abbott Laboratories. Abbott is kicking in more than $6 billion to help Boston chase its white whale. If Boston Sci wins, it will spin off a variety of Guidant's medical devices, including stents, to Abbott. If J&J wins, Abbott still gets the stents.
Boston Sci and J&J are rivals in the drug-eluting coronary stent business — little metal-mesh cylinders that prop open arteries that heart disease has damaged. But the stent market, a hot growth area a couple of years ago, is slowing dramatically, and Boston Sci needs new business drivers. J&J is much more diversified, and with 9 times the market value of Boston Sci, can afford to throw more cash around. (Some analysts are already calling Boston's latest bid crazy.)
Both want Guidant for its lucrative heart implant products. But deaths of several Guidant patients have spurred recalls and legal action. That hasn't deterred either suitor in the bidding war, although it was those ongoing problems, and J&J's insistence on a price reduction in November, that opened the window for Boston's rival bid.— Alex Lash
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