Merger mania
I don’t know if you have been keeping up with this story, but because it impacts me I have been reading all I can find on it.
The story to date:
In December 2004, Johnson and Johnson (JNJ) makes a bid for medical device maker Guidant (GDT). The offer is at $76 a share. During the summer, Guidant had to recall some of its defibrillators and pacemakers due to safety issues and lawsuits. JNJ kept stressing it intended to complete the deal, but in October (as government approval was being granted) JNJ began to negotiate a lower price due to the lower perceived value of Guidant.
On November 1 GDT was contacted by Boston Scientific (BSX), another medical device company, about a possible combination of companies. GDT tells BSX they can not discuss this due to their merger agreement with JNJ. GDT then tells JNJ of the contact from BSX.
JNJ continues to push for a lower buyout price, knowing that BSX was interested in GDT. JNJ is able to lower their offer price to just over $63 a share (about $4 billion less than the original offer) and GDT management accepts. However their shareholders have yet to vote on it.
Enter BSX on Monday, making an offer for GDT at $72 a share, or about $3.5 billion higher than JNJ renegotiated price. JNJ says they remain committed to the buyout, but have yet to counter with another offer. And after the renegotiation it would definitely be a loss of face if they did. GDT would have to pay JNJ hundreds of millions of dollars in break-up fees if their deal does not go through, but measured against the increase in value of the BSX offer that shouldn’t be a concern.
Stay tuned for this one, the fun may be just beginning. I was floored by the announcement and look forward to see what develops. It is also interesting to see the ripples in the medical device community, with shares of St. Jude (STJ) increasing. Some investors figure JNJ will attempt to buy it if their offer for GDT doesn’t go through. Why do I feel that Gordon Gekko is laughing somewhere?
The story to date:
In December 2004, Johnson and Johnson (JNJ) makes a bid for medical device maker Guidant (GDT). The offer is at $76 a share. During the summer, Guidant had to recall some of its defibrillators and pacemakers due to safety issues and lawsuits. JNJ kept stressing it intended to complete the deal, but in October (as government approval was being granted) JNJ began to negotiate a lower price due to the lower perceived value of Guidant.
On November 1 GDT was contacted by Boston Scientific (BSX), another medical device company, about a possible combination of companies. GDT tells BSX they can not discuss this due to their merger agreement with JNJ. GDT then tells JNJ of the contact from BSX.
JNJ continues to push for a lower buyout price, knowing that BSX was interested in GDT. JNJ is able to lower their offer price to just over $63 a share (about $4 billion less than the original offer) and GDT management accepts. However their shareholders have yet to vote on it.
Enter BSX on Monday, making an offer for GDT at $72 a share, or about $3.5 billion higher than JNJ renegotiated price. JNJ says they remain committed to the buyout, but have yet to counter with another offer. And after the renegotiation it would definitely be a loss of face if they did. GDT would have to pay JNJ hundreds of millions of dollars in break-up fees if their deal does not go through, but measured against the increase in value of the BSX offer that shouldn’t be a concern.
Stay tuned for this one, the fun may be just beginning. I was floored by the announcement and look forward to see what develops. It is also interesting to see the ripples in the medical device community, with shares of St. Jude (STJ) increasing. Some investors figure JNJ will attempt to buy it if their offer for GDT doesn’t go through. Why do I feel that Gordon Gekko is laughing somewhere?
posted by Dwight at
11:10 AM
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