J&J Keeps Bid for Guidant

This is getting fun. Johnson & Johnson (JNJ) now says that it’s not going to raise its bid for Guidant (GDT). If you’re keeping score, Boston Scientific (BSX) is offering $25 billion for Guidant compared with J&J’s bid of $21.5 billion.
Boston Scientific is so much smaller than J&J. I’m not really sure how they plan to pull this one off. According to the WSJ:

The price is a hefty one for Boston Scientific, which has a market capitalization of $22.4 billion. The Natick, Mass., company would have to shoulder $10.5 billion in new debt and issue significantly more shares to pay for Guidant, of Indianapolis. And that could be just the start. Johnson & Johnson has a market capitalization nine times the size of Boston Scientific, and far deeper pockets to fund a bidding war. Among the 10 largest deals receiving counterbids this year, only two have succeeded, according to Thomson Financial.

On top of that, there’s the problem of the recalls. This would be a fight over a company that neither should want. This reminds me of the Churchill quote about a turncoat Tory MP, it was the only instance of a rat swimming towards a sinking ship.
BSX’s deal is for half in cash and half in stock. I was shocked to see that Boston Scientific’s stock didn’t fall much yesterday. I see that it’s slightly higher today. Either the market thinks there’s real potential here, or they don’t think BSX has a serious chance of nabbing Guidant.
If Johnson & Johnson can emerge from this unscathed, I think it could be an excellent buy. Stay tuned. This ain’t over.

Posted by on December 6th, 2005 at 11:12 am


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