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Biotech / Medical : Guidant (GDT)
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To: X-Ray Man who wrote (229)2/13/2006 12:38:32 AM
From: Lance Bredvold  Read Replies (2) of 235
 
It is possible the price of GDT will go back up with approval, but I don't think it necessary. I come at it as a stockholder in JNJ and SRDX so I see the negatives of the acquisition more easily than some (and perhaps too negatively). But if you are to receive $35 cash for example and 2 shares of BSX stock (those are just made up figures for the purpose of example) and the market only values BSX at $20 a share even though it knows of the deal to acquire GDT, then GDT holders are only getting $75 worth of value on the day of record.

And if everyone agrees that is as much as the combined company is worth, then GDT holders simply would not get as much as advertised. However, most often these collars are arranged in such a way that if the price were below the lower collar, GDT's management would be entitled to renegotiate the deal. That is, they are set up so that we get exactly the right number of BSX shares in my example to make up $45 in value based upon the price on the day of record for BSX shares. The number of shares then can vary anywhere within the collars and the deal remains firm with no right to withdraw. But, if the collars are passed, then the contract is eligible for renegotiation or perhaps even cancellation.

You'd have to read the contract in order to know what terms were settled on for sure. I used to own some GDT but sold it (much too soon at about $40).

Best, Lance
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