Johnson & Johnson moves closer to Guidant deal

Johnson & Johnson has agreed a deal to acquire Guidant for $23.2bn in fully diluted equity value.

J&J will pay $37.25 in cash and 0.493 shares of J&J common stock for each outstanding share of Guidant common stock, giving the transaction a per share value of $68.06 to Guidant shareholders, according to closing market value on 11 January.

Headquartered in Indianapolis, US, Guidant is a specialist in the design and development of cardiovascular medical products that enable less-invasive patient care. Its board of directors is recommending that shareholders vote in favour of the merger at a shareholder meeting on 31 January. J&J will discuss the transaction further at its scheduled analyst meeting on 24 January.

'This agreement provides significant financial value and certainty for shareholders,' said James Cornelius, chairman and ceo, Guidant. 'Together with J&J, we will have the resources to continue to build upon the existing Guidant businesses in our pursuit of meaningful innovations to address cardiovascular disease.'

However, some industry analysts reckon the deal is far from done, as Boston Scientific, a Massachusetts-based medical device producer, tabled a $72 per share offer on 8 January.

'It is clear that our $72 per share offer is superior to the $68.06 per share now being offered by J&J', reads a company statement. 'Our discussions with Guidant are ongoing. We intend to vigorously pursue this transaction to its completion.'

Furthermore, Elliott Associates LP, a hedge fund and Guidant shareholder, has written to Guidant saying that Boston Scientific's offer for Guidant is superior to J&J's, which it values at $64.30 a share.

'We strongly urge Guidant's board to recognise the superiority of Boston Scientific's offer versus J&J's,' states the letter. 'Anything less than $71 per share from J&J should not be accepted.'

Back in December 2004 J&J offered $76 per share for Guidant, but it then lowered its offer, citing concerns about Guidant's financial outlook following the company's recall and issuance of safety warnings for around 88,000 heart defibrillators and almost 200,000 pacemakers.

'Together with Guidant, we have spent more than a year planning an integration that will create an extraordinary cardiovascular device business that can deliver better medical treatment sooner to millions of patients,' said William C. Weldon, chairman and ceo, J&J. 'We strongly believe that our union with Guidant is the only one that can deliver on that promise, and create lasting value for shareholders of both companies.'