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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (992)	1/15/2006 9:45:33 PM
From: richardred	Read Replies (1) \| Respond to of 7243

Guidant/Bid battles Sunday January 15, 2:50 pm ET Modesty is rarely a winning a trait during takeover battles. Lately, however, several bidders have won board recommendations, despite offering less than a rival. That can sometimes be justified. Take Guidant (NYSE:GDT). A week ago, Boston Scientific (NYSE:BSX) had a bid outstanding of $72 a share. Johnson & Johnson replied with a revised offer of just $68. By refusing to recommend Boston, Guidant forced it to raise its offer to $73 and address regulatory risks. That in turn prompted J&J to raise its price to $71 on Friday - not too far off the original $76 bid it made in 2004 but controversially withdrew. No board would admit to recommending a lower bid for purely tactical reasons. However, there are other justifications. The risks of bids are critical. Given the political mood, Unocal was probably right to choose Chevron's bid over CNOOC's richer one. Regulatory and political factors are hard to model. Boards also need to assess how much a bid's equity component might be worth at closing. Where a bidder is desperate or stretched, a discount is justified. That was arguably the case when Qwest failed to win MCI, despite offering 13 per cent more than Verizon. For Guidant, the risk profiles of the rival bids are similar. This explains why J&J reduced the gap between its bid and Boston's. However J&J's decision to raise its cash component to $41 a share, compared with Boston's $37, looks astute. Boston's size and balance sheet capacity cannot match J&J's. Although it could still raise its offer to a level clearly higher than J&J's, its ability to do so without increasing the risk profile of its bid is starting to look limited. biz.yahoo.com