Guidant: The Morning After

The International Herald Tribune has some reporting and commentary on Boston Scientific’s blockbuster buyout of Guidant, and their besting of rival Johnson & Johnson.
The big winner? Surprise — it’s Abbott Laboratories!

“[J&J’s] reputation had been as a savvy acquirer and a fair acquirer, and I think those two elements have been diminished in this,” said Jan David Wald, a health care analyst at A.G. Edwards & Sons. Johnson & Johnson’s declining drug sales in the United States makes further expansion into medical devices a necessity, Wald said, but the Guidant stumble could hinder its ability to pursue future deals.
There are risks for Boston Scientific, not the least of which is the possibility that it is paying too much for Guidant to recoup its investment. Johnson & Johnson could try to slow down Boston Scientific’s efforts to close the Guidant deal by pressing antitrust objections at the U.S. Federal Trade Commission.
The one clear winner in the deal, analysts said, is Abbott Laboratories, which injected up to $6.2 billion into Boston Scientific’s offer through a variety of side deals, stock sales and below-market-rate loans to that company. As the payoff, Abbott would receive virtually all of Guidant’s business except for its heart-regulating implants. On news of the deal and a forecast of strong drug sales during Abbott’s fourth-quarter earnings announcement, the company’s stock was up more than 5 percent on Wednesday.
The Guidant portfolio of products to treat damage to the circulatory system from diseases like diabetes generates more than $1 billion annually in sales. The deal would transform Abbott into a major player in outpatient clinics and hospital laboratories that deliver therapy through catheters as an alternative to more invasive surgical treatments. Analysts say its share of the Guidant deal could begin contributing to Abbott’s earnings next year.
That outcome represents a huge improvement from the gains Abbott could have expected if Johnson & Johnson had acquired Guidant. Under that deal, Abbott was to have received access to a valuable stent implant system and rights to certain stent-coating drugs. Johnson & Johnson had worked out that arrangement to satisfy antitrust objections.

It was fun bringing you the news of this merger… We now can look forward to juicy tidbits about a breakup.
More from Boston Scientific…