Medical-device maker Guidant Corp. (GDT) on Wednesday said it accepted a revised takeover offer of $23.2 billion from Johnson & Johnson (JNJ) instead of a rival $25 billion bid from Boston Scientific Corp. (BSX)

The move marks the second time J&J has revamped its offer for Guidant and adds the latest twist in the 13-month takeover saga of Guidant, which has suffered from product recalls and litigation over the safety of its heart devices.

Boston Scientific, however, has no plans to walk away from the takeover battle.

"Our discussions with Guidant are ongoing. We intend to vigorously pursue this transaction to its completion," Boston Scientific said in a statement.

J&J had agreed to buy Guidant in December 2004 for $25.4 billion, or $76 a share, to gain a greater share of the $10 billion market for devices that help regulate heart beats.

In November, J&J had slashed its offer to $21.9 billion following Guidant's product woes, opening the door for Boston Scientific to make its offer.

Boston Scientific, which makes cardiovascular devices and products used in oncology and urology, formalized its bid on Sunday, putting pressure on J&J to move quickly to offer more money or risk losing Guidant.

Under the new agreement, J&J will pay about $68.06 per share in cash and stock for Guidant. That is higher than the reduced agreement it struck in November, but still below Boston Scientific's current bid of $72 a share.

J&J did not comment on why it was willing to raise its offer for Guidant just two months after saying the product recalls had materially damaged the value of the company.

"What are they thinking about now? The fact that J&J is silent on that speaks volumes about what they had attempted to do before — just to get a good price," said WBB Securities analyst Steve Brozak.

Guidant said it urged its investors to vote in favor of the new agreement at a January 31 shareholder meeting.

Nancy Havens, whose $200 million hedge fund owns Guidant shares, said Boston Scientific's offer is still superior to J&J's raised bid.

"J&J will lose the vote," Haven said. "Right now, Guidant is in control of the arbs (arbitrageurs) for a change and they're not going to go for it."

J&J has the advantage of time, however, since its agreement with Guidant already has won regulatory approval. Boston Scientific has said its proposed deal would close in the first quarter.

"I can't believe that Guidant said yes to this deal. It seems outrageous to me," Havens said. "Maybe they just think that they're further down the road with J&J and it's easier to say yes."

Despite backing the new J&J bid, Guidant has told Boston Scientific that it would be open to additional talks and a new offer, sources familiar with the situation said.

A 'Bet-the-Ranch Deal'

Analysts said they expect Boston Scientific to return with a higher offer, especially since it has a $14 billion cushion of funds that a group of banks have agreed to lend to help it finance the deal.

"Boston Scientific will not go quietly into the night," Brozak said.

Fund manager Sherwood Small, whose Boston Private Value Fund owns J&J shares, said both Boston Scientific and J&J need the Guidant unit that sells profitable implantable cardioverter defibrillators, among the fastest-growing segments of the medical device sector.

"The difference is, for Boston Scientific, this is a bet-the-ranch deal," he said, adding that, if Boston Scientific is not successful in this contest, it will have to buy another company or else be bought itself.

Allen Michel, a merger and acquisition professor at Boston University School of Management, contends that the winner of the contest will be the loser.

"Whenever you have multiple bidding ... the firm that wins usually ends up paying too much. It's a phenomenon that's known on Wall Street as the 'winner's curse."'

Guidant shares gained $1.05 to close at $70.44 on the New York Stock Exchange. It was the first time the stock closed above $70 in three months.