J&J, Guidant Agree -- for Now

The companies hammer out a sweetened merger deal, but the game may not be over.
Author:
Publish date:

Updated from 8:20 p.m. EST

The more things change, the more they stay the same.

Medical-device company

Guidant

(GDT)

and

Johnson & Johnson

(JNJ) - Get Report

late Wednesday agreed to a revised buyout offer that calls for Johnson & Johnson to acquire Guidant in a deal worth $23.2 billion.

As agreed, health care products giant J&J will pay $37.25 in cash and 0.493 share of J&J common stock for each outstanding share of Guidant common stock, according to a joint news release from the companies.

As of the market's close Wednesday, the per-share value of the transaction was $68.06 to Guidant shareholders.

Shares of Guidant closed the regular session up $1.05 to $70.44; J&J shares ended the day down 60 cents to $62.50.

Guidant's board is recommending that its shareholders vote in favor of the revised merger agreement at the company's shareholder meeting scheduled for Jan. 31.

The move would initially seem to usurp an unsolicited

$25 billion bid from

Boston Scientific

(BSX) - Get Report

. Guidant, based in Indianapolis, and New Brunswick, N.J.-based J&J, originally reached a merger valued at $76 a share in December 2004.

However,

The Wall Street Journal

reported late Wednesday that sources familiar with the talks said Guidant has invited Boston Scientific to tweak its offer, and that it would likely consider such a bid.

According to the

Journal's

sources, "the possibility of a limited bidding war for Guidant is believed to be very much alive."

Indeed, following the latest merger announcement, Boston Scientific replied with its own two-paragraph press release that exuded the confidence of a continuing player: "It is clear that our $72 per share offer is superior to the $68.06 per share now being offered by Johnson & Johnson. Our discussions with Guidant are ongoing. We intend to vigorously pursue this transaction to its completion."

After Guidant was hit by a series of heart-device recalls last year, J&J threatened to abandon its original deal before agreeing in mid-November on a lower takeover price. Both companies appeared satisfied with the revision, but in December, Boston Scientific offered a better deal for Guidant.

The move marks the second time J&J has revamped its offer for Guidant. In November, J&J had slashed its offer to $21.9 billion after safety concerns and litigation over Guidant's heart products.

"Together with Johnson & Johnson, we will have the resources to continue to build upon the existing Guidant businesses in our pursuit of meaningful innovations to address cardiovascular disease," said Guidant CEO James Cornelius.

Johnson & Johnson, according to the release, has secured the necessary regulatory clearances and satisfied all conditions to close the deal, and will file updated materials with the

Securities and Exchange Commission

.

Johnson & Johnson will discuss the transaction in detail during its scheduled analyst meeting on Jan. 24.