Boston Scientific Gets Guidant

"We believe the transaction and the strategic rationale for this combination are in the best interests of our patients, employees, customers and shareholders -- reflecting the full value of our firm," said Guidant's chairman and CEO, Jim Cornelius. "The combination of these two companies provides faster, more consistent revenue growth opportunities to shareholders."

Shares of both Guidant and Boston Scientific were lower following the news. Guidant fell $1.61, or 2.1%, to $75.17, and Boston Scientific lost 54 cents, or 2.3%, to $23.46. J&J's shares were down 37 cents, or 0.6%, at $58.99.

"We are excited about combining the talent and experience of Boston Scientific and Guidant employees," said Jim Tobin, Boston Scientific's president and CEO. "We look forward to working with Guidant to complete the transaction quickly and to creating a global leader in cardiovascular devices."

Guidant said its board and Boston Scientific's have approved the deal, which is subject to antitrust review and shareholder approval. However, if the Guidant deal doesn't close by the end of the first quarter, Boston agreed to pay Guidant shareholders interest amounting to 1.32 cents a share for every day the merger is delayed after March 31.

Meanwhile, Guidant is required under the terms of its previous agreement with J&J to pay a $705 million breakup fee since it terminated their merger deal. The fee, payable this month, will be reimbursed by Boston Scientific.

Boston Scientific has faced concerns that the acquisition could hamper its earnings growth and lead credit agencies to lower their ratings on the company's debt. Boston has said the deal may not be accretive until 2009, and some analysts believe it could be even later than that. So far its ratings haven't been cut.

The Boston Scientific bid includes an agreement to divest certain stent operations to Abbott Laboratories(ABT). Abbott, the Illinois-based drug and device conglomerate, also agreed to buy 56 million Boston Scientific shares for about $1.4 billion, giving it a 4% stake in Boston. Abbott is paying $4.1 billion for Guidant's vascular intervention and endovascular businesses, and will lend Boston Scientific $900 million.

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