Updated from 5:36 p.m. EST
late Thursday raised the stakes in its latest bid for medical-device maker
The Natick, Mass.-based company increased its offer to $73 a share from $72, or roughly $26 billion from $25 billion, in the hopes of trumping fellow contender
Johnson & Johnson
The move comes barely a day after
J&J augmented its offer for Guidant, boosting it $1.7 billion to $23.2 billion.
In its latest offer, Boston Scientific will pay $36.50 in cash and $36.50 worth of Boston Scientific shares for each outstanding share of Guidant common stock. The per-share value of the transaction is $73.
Under J&J's latest bid, the company would pay $37.25 in cash and 0.493 shares of J&J common stock for each outstanding share of Guidant common stock, or $67.92 per share.
Boston Scientific said in a release that it has notified Guidant's board of directors that its amended offer will expire at 4 p.m. EST Friday, unless the board has declared that it prefers Boston Scientific's sweetened offer to J&J's (based on the regular session closing price of J&J's common stock on Thursday).
Shares of Guidant lost 4 cents to close Thursday at $70.40. J&J closed off 29 cents to $62.21, and Boston dropped 36 cents to $25.05.
Two months ago, the idea of J&J raising its price for Guidant would have been difficult to fathom, considering at one time it appeared close to calling the whole thing off. Guidant and J&J originally signed a merger deal worth $76 a share in December 2004, but the pact nearly fell apart after Guidant endured a series of heart-device recalls last year. The sides agreed in mid-November on a revised takeover price of a little more than $63 a share.
Then, in early December, Boston Scientific entered the picture, saying it would trump that price by nearly $9 and pay $72 a share for Indianapolis-based Guidant. J&J kept its poker face for several weeks, until Wednesday, when it said it could live with paying what amounts to a bit less than the midpoint of its previous two offers.
Guidant's board was already publicly supporting J&J, and it did so again after the New Brunswick, N.J., health-products giant came out with the roughly $68-a share offer.
"Guidant is doing a masterful job of pitting one against the other," says Jefferies & Co. analyst Ryan Rauch. "But ultimately, if J&J wants Guidant, it can get Guidant."
John Putnam, an analyst at Stanford Financial, believes that Boston Scientific should walk away from the fight, considering it might have to wait three years before the Guidant takeover starts boosting its bottom line. "I think they could visit
if they want to be in
implanted cardiac defibrillators." St. Jude's name has come up from time to time in takeover speculation among analysts.
Although it's anyone's guess which company will end up the winner, Rauch says it comes down to a question of which stock Guidant shareholders want to own. Rauch himself prefers Boston Scientific's stock.
"They have a better pipeline, they have faster top-line growth, and they're cheaper," he says.
For now, Putnam believes J&J has made its last bid. "This is their third offer, and they didn't even come halfway between their original offer and their lower offer," he says.
Meanwhile, hedge funds, which Putnam says are significant Guidant shareholders, "could care less about a future with J&J. They're looking to make the biggest return in the shortest period of time."