Boston Scientific-Guidant Deal Closes Friday April 21, 1:05 pm ET By Mark Jewell, AP Business Writer Boston Scientific-Guidant Deal Closes, 3 Months After Bidding War
BOSTON (AP) -- Boston Scientific Corp. on Friday completed its acquisition of Guidant Corp., a $27 billion deal that emerged from a bidding war against Johnson & Johnson and creates the world's biggest maker of cardiovascular devices. ADVERTISEMENT
The closing came three weeks later than Boston Scientific had initially hoped -- a delay that will cost the Natick, Mass.-based company $95 million in interest payments to shareholders of Guidant.
Boston Scientific sparked a bidding war in December that derailed a standing agreement Johnson & Johnson struck to purchase Guidant. Boston Scientific agreed in January to pay Guidant shareholders nearly $4.5 million a day in interest for each day after March 31 that the acquisition failed to close.
The closing came a day after Boston Scientific announced approval from the Federal Trade Commission, and more than a week after European antitrust regulators consented. Shareholders of Boston Scientific and Indianapolis-based Guidant overwhelmingly approved the transaction March 31.
"We are looking forward to realizing the substantial benefits of combining Boston Scientific and Guidant," said Jim Tobin, president and CEO of Boston Scientific, said Friday.
Boston Scientific shares climbed 21 cents, or 1 percent, to $22.50 in midday trading on the New York Stock Exchange. Guidant shares -- which were to convert to Boston Scientific shares at the end of trading Friday -- were up 45 cents at $79.98, just below Boston Scientific's $80-per-share offering price in the transaction.
With the addition of Guidant's portfolio of implantable defibrillators and pacemakers, Boston Scientific is expected to surpass Fridley, Minn.-based Medtronic Inc. as the world's largest maker of cardiovascular devices.
Boston Scientific expects its Guidant purchase will nearly double its annual sales from $6.3 billion last year to about $12 billion by 2008. Guidant had $3.55 billion in revenue last year.
Analysts, however, have said Boston Scientific won't see earnings gains from the deal until 2010. And the company must try to regain consumer confidence in Guidant's products, which have seen sliding sales because of recalls and news that the company withheld information about the faulty products.
To satisfy concerns that the combined company could command too great a share of the market for heart stents, Boston Scientific agreed to sell a piece of Guidant's business, including its drug-coated stents, to Abbott Laboratories Inc.
In a deal that also closed Friday, North Chicago, Ill.-based Abbott agreed to pay $4.1 billion in cash, provide a $900 million loan to Boston Scientific and acquire $1.4 billion in Boston Scientific stock.
Besides adding Guidant's defibrillators and pacemakers, Boston Scientific hopes its Guidant purchase will diversify a product line that has largely depended on the Taxus drug-coated stent to drive profits.
Boston Scientific and New Brunswick, N.J.-based J&J dominate the 2-year-old, $6 billion-a-year market for drug-coated stents, metal-mesh devices that prop open coronary arteries after surgery to clear blockages. Newer models are coated with slow-release drugs that prevent post-surgical scar tissue from forming new blockages.
Boston Scientific and J&J face new competition in that market, with Medtronic and others introducing their own drug-coated stents.
Boston Scientific has projected about one-quarter of its sales will come from Guidant's pacemakers and defibrillators. Guidant is No. 2 to Medtronic in the fast-growing, $10 billion-a-year-market for those devices, which help the heart maintain a steady rhythm.
The deal combines the 18,000 employees of Boston Scientific, a 27-year-old company, with the 12,000 workers at Guidant, which was spun off by drug maker Eli Lilly and Co. in 1994.
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