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Medical equipment industry

Boston Scientific Challenges Johnson & Johnson's Bid for Guidant in $25 Billion Deal

Strategic Insights

— 2 min read

Boston Scientific Corp. has shaken up the medical device market by submitting a $25 billion bid for Guidant Corp., a maker of implantable heart devices, in a move that could thwart Johnson & Johnson's $21.5 billion acquisition offer. The surprise bid represents a 14 percent premium over J&J's recent reduced offer and comes as both companies seek to diversify and grow in the lucrative field of medical devices. Guidant's cardiac rhythm management division, which employs about 3,100 people in Arden Hills, would become part of Boston Scientific's operations, with no job cuts planned. The deal, which would also see the divestment of Guidant's stent business to avoid antitrust issues, is subject to shareholder approval from both companies, as well as regulatory clearance from the Federal Trade Commission and European regulators.

Key Takeaways:

  • Boston Scientific has submitted a $25 billion bid for Guidant Corp., a 14 percent premium over Johnson & Johnson's recent reduced offer of $21.5 billion.
  • The bid represents a significant move by Boston Scientific to diversify its business beyond its blockbuster heart stent business, which accounts for about half its annual revenue.
  • The acquisition would bring Guidant's 3,100 employees in Arden Hills under Boston Scientific's umbrella, with no job cuts planned, and would result in the company employing close to 7,000 people in the Twin Cities.
  • Boston Scientific's Chief Operating Officer Paul LaViolette cited the company's Minneapolis team as a valuable asset and a key factor in the decision to bid for Guidant.
  • The deal is subject to shareholder approval from both companies, as well as regulatory clearance from the Federal Trade Commission and European regulators.
  • Guidant's stent business would be divested to avoid antitrust issues.
  • The acquisition would result in a combined entity with significant market presence in the implantable cardioverter defibrillators (ICDs) and pacemakers market, with a solid No. 2 position behind Medtronic Inc.
  • J&J and Boston Scientific both believe they can weather dozens of lawsuits that surfaced after Guidant's recalls of ICDs and pacemakers.

Statistics:

  • Boston Scientific's bid is a 14 percent premium over J&J's recent reduced offer of $21.5 billion.
  • Boston Scientific's $25 billion bid would mark a significant expansion of the company's cardiovascular business, which currently employs 3,500 in Maple Grove and Plymouth.
  • Guidant's cardiac rhythm management division employs about 3,100 people in Arden Hills.
  • Boston Scientific's taxus drug-coated heart stent has a $5.5 billion market share.
  • The ICD market is expected to reach $10 billion this year and grow by at least 15 percent annually in the coming years.
  • Fridley-based Medtronic Inc. commands more than 50 percent of the ICD market, with St. Jude Medical Inc. holding a 20 percent share.

Sources:

  • [Boston Scientific Corp.]
  • [Johnson & Johnson]
  • [Guidant Corp.]
  • [Wall Street Journal]
  • [Piper Jaffray & Co.]
  • [Edward Jones]

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