Device Drama Not Over Yet

Boston Scientific's (BSX) holding the exit door wide open, but what remains to be seen is whether Johnson & Johnson (JNJ) will walk through it or stick around for a fight.

Hardly a month ago, J&J was about to be dragged into court for threatening to abandon would-be merger partner Guidant (GDT) after saying their $76-a-share agreement was no longer tenable. Eventually the two sides agreed to get along, and they worked out a new deal that valued Guidant north of $63 a share.

Meanwhile, Boston Scientific was laying its own plans, and its strategy is a secret no more. By swooping in Monday with a proposal to buy Indianapolis-based Guidant for $72 a share, Boston Scientific now threatens to leave the formerly reluctant J&J as the odd man out.

J&J waited a day to respond to the challenge, but when it did, the New Brunswick, N.J., health care concern said its offer "represents full and fair value based on extensive evaluation and due diligence and is in the best strategic interest of Guidant, its customers and patients."

Not So Secret

Though Boston Scientific's offer for Guidant became known to the public just a day ago, the company made inquiries about such an arrangement last month. During their renegotiation talks, Guidant notified J&J that on Nov. 1 Boston said it wanted to discuss the possibility of a merger. However, Guidant didn't actively use the potential new suitor as a negotiating tool.

"In such a tenuous position they didn't want to walk away from [the J&J deal]," says Steve Brozak of WBB Securities. "If they started negotiations with another party, that would give J&J an opportunity to back out entirely."

Boston Scientific, whose proposal for Guidant is valued at about $25 billion, or $72 per share, is more than $8 above J&J's revised bid, but $4 short of J&J's original terms announced last December. Should J&J opt to stay, the big question is whether it will be willing to part with more money to make the merger happen.