J&J seen walking away from Guidant
Tuesday December 6, 5:03 pm ET
By Julie Steenhuysen
CHICAGO (Reuters) - Johnson & Johnson (NYSE:JNJ - News) , facing a rival bid for Guidant Corp. (NYSE:GDT - News) , on Tuesday said it was committed to the transaction but failed to raise its offering price, signaling to many on Wall Street that it may walk away from the deal.
J&J issued the statement a day after Boston Scientific Corp. (NYSE:BSX - News) made a surprise $25 billion offer for medical device maker Guidant -- topping J&J's recently reduced price of $21.5 billion, which had been worked out with Guidant last month.
J&J said its offer represents the "full and fair value" for Guidant, and that it expects Guidant shareholders to vote on its bid at a meeting expected to take place in the first quarter of 2006.
Guidant's deal with J&J nearly collapsed amid safety concerns and litigation over recalls of its implantable cardioverter defibrillators, devices that detect and treat potentially lethal heartbeats.
Instead, J&J was able to reduce its bid to $63 per share from $76. But by pushing hard for the discounted price, some analysts now believe J&J may have painted itself into a corner.
"After all the noise they made, there would certainly be a lot of questions asked (if they raised their bid)," said A.G. Edwards analyst Jan Wald.
CHANCE OF J&J-GUIDANT COMBO 'ALMOST ZERO'
In light of J&J's Tuesday statement, Wald said the chances of getting a J&J-Guidant deal done are "almost zero."
Harris Nesbitt analyst Joanne Wuensch said she doesn't expect J&J to raise its offer and took the J&J statement as a signal to investors that "they are willing to walk away."
Matt Stephani, a portfolio manager at Idex Great Companies-America Fund, said: "I'd be surprised if J&J raises its bid because there are other potential acquisitions out there and I don't think they mind walking away from Guidant if it means a higher price."
But Piper Jaffray analyst Thomas Gunderson said J&J's initial response is not necessarily the company's last word on the deal.
"I wouldn't read too much into the initial counter-punch," he said. "I think this is an effort to tide themselves over in the first day or two."
Boston Scientific, meanwhile, reiterated its ardor for Guidant on Tuesday.
"We have brought a lot of companies into the Boston Scientific family and we have never been more confident or enthusiastic about the prospects for a merger," spokesman Paul Donovan said.
"We believe our $72 proposal is better for Guidant, its shareholders and its employees than Johnson & Johnson's revised offer. We are offering significantly more value, and there is strong upside potential over time," Donovan said.
A Guidant deal would deliver a new growth platform for Boston Scientific at a time of slowing sales of its drug-coated stents, which are used to keep blood flowing through diseased heart arteries.
Should J&J's Guidant bid fail, several analysts have speculated the company could buy St. Jude Medical Inc.(NYSE:STJ - News), a rival maker of heart devices with an unblemished reputation.
"I think they (St. Jude) definitely look like they are in play," said A.G. Edwards' Wald. "They certainly would be an attractive candidate."
William Blair analyst Ben Andrew, in a research note, echoed the sentiment on St. Jude.
"We view St. Jude as the cleanest entry point for an acquirer looking to gain access to the rapidly growing cardiac rhythm management market and would not be surprised by a take-out in the coming year," Andrew said.
St. Jude's shares climbed $1.05, or 2 percent, to $51.61 Tuesday on the New York Stock Exchange, while Guidant's shares fell $1.10, or 1.62 percent, to $66.88, J&J's shares fell 58 cents, or nearly 1 percent, to $60.47, and Boston Scientific slipped 1 cent to $26.34 on the exchange.
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(Additional reporting by Ransdell Pierson in New York) |
