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Boston Scientific Gets Guidant

Updated from 7:18 a.m. EST

The hard-fought battle for Guidant (GDT) looked over Wednesday with Boston Scientific (BSX - Get Report) emerging victorious.

Guidant, the Indianapolis-based medical device maker, agreed to be acquired by its Massachusetts suitor after Johnson & Johnson (JNJ - Get Report) let pass a midnight deadline to sweeten its takeover offer.

Boston Scientific's plan to buy Guidant for $80 a share represents a price that, on a split-adjusted basis, the company's stock never reached during its 11-year run in the public markets. Eli Lilly (LLY), Guidant's former parent, first offered shares in the company in December 1994.

Any investors who have been holding Guidant's common since then are getting one rich payoff: Adjusted for stocks splits and dividends, Guidant closed at $3.55 a share on Dec. 14, 1994, translating to a profit of more than 2200% for those who were there at the beginning.

While analysts say J&J could have easily outbid Boston Scientific, the New Jersey health-care giant opted to quit the fight. One obvious reason is that for J&J to continue, it would have had to lift its bid above the original $76-a-share offer made in December 2004, and that never seemed likely.

After Guidant recalled around 100,000 heart devices last year, J&J revised its initial price lower by about $13, saying the pacemaker seller was worth closer to $63 a share. However, J&J did eventually raise its takeover price two times after Boston Scientific entered the fray, ultimately stopping at $71 a share, or $24 billion.

In the end, trying to trump Boston again "would not have been in the best interest of its shareholders," J&J said in a press release.

As a result, Guidant terminated its agreement to be acquired by J&J and canceled a previously planned meeting at which shareholders were to vote on the deal. Instead, Guidant will be acquired by Boston Scientific for what amounts to $27 billion, an aggressive offer that has led at least one analyst to question the company's strategy.
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