BOSTON – Boston Scientific Corp. (BSX) has given Guidant Corp. (GDT) a deadline to respond by Friday afternoon to its latest buyout offer as the pace picks up in the Massachusetts medical device maker's increasingly pricey bidding war with Johnson & Johnson (JNJ) .
About 24 hours after J&J increased its price for Guidant, Boston Scientific followed suit Thursday night and advised Guidant that its latest offer expires at 4 p.m. EST Friday — unless Guidant's board declares Boston Scientific's offer superior by then.
With such a declaration, Boston Scientific's offer would remain open until Jan. 24. Any pro-Boston Scientific declaration starts a clock of five business days for J&J to make another counteroffer. Guidant's board has sided with J&J's offer for now, but Boston Scientific hopes for a swift reversal.
Its latest proposal boosts its offering by about $330 million and adds other enticements it says address concerns Guidant's board had raised.
The two suitors are dueling for Guidant's business in implantable defibrillators and pacemakers, a fast-growing $10 billion market in which neither J&J or Boston Scientific are players.
Boston Scientific's latest $73-per share cash-and-stock bid is larger than the value of J&J's overall offer, but has a smaller cash component. On Wednesday night, J&J raised its bid from $21.5 billion to $23.2 billion.
Boston Scientific's new offer is roughly $24.9 billion — up from about $24.6 billion in an offer finalized Sunday.
In response, Guidant said in a brief statement that its board "will evaluate all aspects of the offer." J&J spokesman Jeffrey Leebaw declined to comment.
Citigroup analyst Matthew Dodds said in a research note Friday that he didn't believe Boston Scientific's latest offer "is enough to get Guidant to switch sides."
Boston Scientific's new bid "appears more focused on anti-trust issues than a higher price, which is likely to be based on intellectual property as much as timing," Dodds wrote.
New Brunswick, N.J.-based J&J and Indianapolis-based Guidant said in a joint statement Wednesday that Guidant's board of directors recommended shareholders vote in favor of J&J's offer in a Jan. 31 shareholder meeting.
With its latest offer, Boston Scientific values Guidant at $73 per share — $2.60 above its closing price Thursday — and proposes to pay Guidant shareholders half in cash and half with its own shares. Boston Scientific's earlier proposal valued Guidant at $72 per share.
J&J's offer would pay $37.25 in cash — 75 cents per share more than Boston Scientific — and 0.493 shares of Johnson & Johnson stock for each outstanding Guidant share. J&J's offer is worth $67.92 per share.
Boston Scientific fell 12 cents to $24.98 in early trading on the New York Stock Exchange Friday as shares of Guidant rose 20 cents to $70.60. J&J shares fell 13 cents to $62.08.
J&J has argued its proposal offers Guidant shareholders greater certainty and a quicker deal.
In response, Boston Scientific offered an enticement in its revised offer. If the transaction doesn't close by March 31, Boston Scientific will increase the offer's price each day thereafter at a daily rate that amounts to an annual interest rate of 6 percent.
Boston Scientific also said it will agree "to divest all overlapping assets" if required, but the statement did not elaborate. On Sunday, Boston Scientific announced a separate deal to satisfy antitrust issues. It would sell Guidant's vascular business for about $4 billion to Abbott Laboratories Inc., if Boston Scientific succeeds in landing Guidant.
J&J has not proposed to sell that piece of Guidant's business if its deal goes through. Some analysts have suggested that could make J&J's offer more attractive to Guidant investors who might not want to see their company split up, even if it is acquired.
Some shareholders appear to be siding with Boston Scientific. Elliott Associates, a New York hedge fund with about 3 million Guidant shares, or just under 1 percent, wrote a letter to the J&J's board, accusing it of using "heavy-handed and aggressive" tactics and saying it would vote against the J&J offer.
J&J is a close No. 2 behind Boston Scientific in the market for drug-coated stents — metal-mesh devices that are coated with drugs to prevent scar tissue from creating new blockages after artery-clearing surgery.
With new entrants expected in that field, Boston Scientific and J&J both are trying to diversify by acquiring Guidant's business in defibrillators and pacemakers, where Guidant is No. 2 behind Fridley, Minn.-based Medtronic Inc.
In December 2004, J&J offered $25.4 billion for Guidant, but lowered the amount to $21.5 billion 11 months later because of Guidant's product recalls and regulatory investigations.
Since June, Guidant has recalled or issued safety warnings about 88,000 heart defibrillators and almost 200,000 pacemakers. The company also faces numerous lawsuits.
J&J has said its larger size gives it greater resources to fix Guidant's problems and sustain long-term growth. J&J posted $47.3 billion in revenue in 2004 to Boston Scientific's $5.6 billion.
Boston Scientific, just 27 years old to J&J's 120 years, argues it has better growth prospects. But it has lost some ground recently to J&J in the $6 billion drug-coated stent market, and analysts say Boston Scientific's willingness to bid higher is an admission that it needs new products to spur continued growth.
Stent sales helped Boston Scientific more than double its earnings in 2004, but peaked in that year's final quarter. Boston Scientific shares fell 28 percent last year.