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J&J Doesn't Lift Guidant Bid Despite Rival's Higher Offer

December 07, 2005|From Reuters

Johnson & Johnson, facing a rival bid for Guidant Corp., said Tuesday that it was committed to the transaction but failed to raise its offering price, signaling to many on Wall Street that it might walk away from the deal.

J&J issued the statement a day after Boston Scientific Corp. made a surprise $25-billion offer for medical device maker Guidant -- topping J&J's recently reduced price of $21.5 billion, which had been worked out with Guidant last month.

J&J said its offer represented the "full and fair value" for Guidant and that it expected Guidant shareholders to vote on its bid at a meeting expected to take place in the first quarter of 2006.

Guidant's deal with J&J nearly collapsed amid safety concerns and litigation over recalls of Guidant's implantable cardioverter defibrillators, devices that detect and treat potentially lethal heartbeats.

Instead, J&J was able to reduce its bid to $63 a share from $76. But by pushing hard for the discounted price, some analysts now believe, J&J may have painted itself into a corner.

"After all the noise they made, there would certainly be a lot of questions asked" if the company raised its bid, said A.G. Edwards analyst Jan Wald.

In light of J&J's Tuesday statement, Wald said the chances of a J&J-Guidant deal were "almost zero."

Harris Nesbitt analyst Joanne Wuensch said she didn't expect J&J to raise its offer and took the J&J statement as a signal to investors that "they are willing to walk away."

Should J&J's Guidant bid fail, several analysts have speculated the company could buy St. Jude Medical Inc., a rival maker of heart devices with an unblemished reputation.

St. Jude's shares climbed $1.05 to $51.61, and Guidant's shares fell $1.10 to $66.88. J&J's shares fell 58 cents to $60.47, and Boston Scientific slipped 1 cent to $26.34.

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