Guidant's fate decided — we think
The bidding war is over. Boston Scientific finally beat out Johnson & Johnson to buys medical devices manufacturer Guidant with a $27 billion offer. At least we think it's over. There have been so many twists and turns in the Guidant auction that it's hard to figure out what final agreement means. But J&J has declared it has dropped out of the bidding, so it does seem like a done deal.
On January 12, Guidant declared it would accept J&J's $23.2 billion offer, spurning a $25 billion offer from Boston Scientific. According to some reports, Guidant objected to Boston Scientific's intention to quickly spin off Guidant's catheter and stent business, to Abbot Laboratories for $4.3 billion.
But the history goes back even further. J&J originally made an offer in December 2004 for $25 billion, and the deal look sewn up. Last summer, serious technical (and legal) problems with Guidant defibrillators resulting amajor recalls looked likely to scotch the deal. J&J lowered its bid and seemed ready to walk away. Guidant threatened to sue to keep them to the deal.
The heart-defibrillation business is generally considered to be a very desirable one, with major growth ahead with an aging population. As a Wall Street Journal article put it ("Guidant Accepts Sweeter J&J Deal", 1/12/06):
People on Wall Street who watch the medical-device industry see robust long-term prospects for the heart-defibrillator business, with it continuing to grow about 20% a year, despite Guidant's short-term difficulties with product malfunctions.
Boston Scientific is a direct competitor with Guidant and Johnson & Johnson in the stent business. It sells a variety of medical instruments including catheters, surgical grafts, and specialty devices for specialists in urology, gynecology, obstetrics, and other fields
The company has grown through an aggressive series of acquisitions, though of far smaller companies than Guidant. These include such firms as Embolic Protection, Advanced Bionics. Catheter Innovations, CryoVascular Systems, Quanam Medical Corporation, Advanced Stent Technologies. Interventional Technologies, Cardiac Pathways Corporation, Precision Vascular Systems, and RadioTherapeutics Corporation, all acquired over the last five years.
As another Wall Street Journal article ("Boston Scientific Faces Pivotal Test
After Victory in Fight for Guidant", 1/26/06) points out:
The combined company, with revenue of about $9 billion, will have the No. 1 position in the U.S. in selling coronary stents, the tiny arterial implants that now dominate interventional cardiology. It also will have the No. 2 position in selling implantable defibrillators. These increasingly popular products rein in lethally fast heartbeats and have supplanted pacemakers as the main growth area in cardiac electrical therapy. Both products have rich profit margins and stand to benefit from an aging, overweight U.S. population.
Already, of course, there is speculation about where Johnson & Johnson will look to make an acquisition, now that it has so much acquisition money lines up. Among mentioned candidates are Conor Medsystems, a stent developer, and St. Jude Medical, which is #3 in heart regulating implants.
