Medical devices group Guidant faces a tight deadline to endorse a richer $25 billion (€20.6 billion) bid from Boston Scientific or try to squeeze more money out of its existing merger partner Johnson & Johnson, analysts said.
Boston Scientific on Thursday raised its takeover bid by about $340 million to $24.8 billion and made other concessions to appease Guidant's concerns about antitrust scrutiny and the timing of the deal's completion. But it set a deadline of yesterday evening for Guidant to respond.
Boston Scientific's latest bid is valued at $73 per share, up from its earlier offer of $72 per share. The J&J bid is valued at about $23 billion, or $68 per share.
"Guidant has to get a new offer out of J&J or they will face a serious backlash from shareholders. How do you turn down $73 a share and say $68 is better?" said one arbitrageur, who declined to be named.
Guidant, which has suffered from product recalls and litigation over the safety of its heart devices, said it would evaluate all aspects of Boston Scientific's latest bid. If it accepts, J&J still has five days to respond. That would extend the takeover saga, which has lasted 13 months. J&J declined to comment.
"Is J&J willing to save a few billion and let Boston Scientific get Guidant?" asked another arbitrageur, also declining to be named. "That's a classic penny wise, pound foolish gamble." Analysts and traders said J&J would only need to raise its bid to $70 per share or $71 per share, since its deal has already passed regulatory review and would likely close sooner. Guidant shareholders are already scheduled to vote on the deal on January 31st.
"Interestingly, [ Boston Scientific] only raised its bid by $1 (per share), signalling that price is but one factor in the negotiation - but includes timeliness of closure," Harris Nesbitt analyst Joanne Wuensch said.
"At this stage in the negotiation process, we believe decisions are being made not only on dollars and cents, but also ego, strategy and a broader view of the competitive landscape," she said.
