In the February 2006
issue:
To The Winners Go The Spoils... Boston
Scientific’s $27 Billion Bid for Guidant Trumps Johnson & Johnson’s While
Abbott Laboratories Lands Itself a Strong Vascular Business
The bidding war between Boston Scientific and Johnson & Johnson for
Guidant came to an end as Boston Scientific clinched the deal with a $27
billion offer. Abbott Labs helped Boston Scientific fund the deal. For its
pains, it will get Guidant’s vascular business for $4.1 billion.
...
The Month In Deals - January
Launches 2006 With 85 Deals Worth $9.4 Billion
A total of 85 mergers and acquisitions were announced in the health care
industry during January 2006. Nearly $9.4 billion was committed to this M&A
activity.
...
In The Departments
Services
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Health Care Services
-
Deal Summaries
-
Additional Transactions
-
Transaction Updates
Technology
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Health Care Technology
-
Deal Summaries
Additional Transactions
-
Transaction Updates
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Articles Archive
Companies Mentioned in this issue:
February 2006
3F Therapeutics p12
A
A4 Health Systems p12
Abbott Laboratories p2
Accorda Therapeutics p13
Allscripts Healthcare Solutions p12
Amedisys p4
American Senior Living p9
AmerisourceBergen p10
ASAP Health Services p4
ATS Medical p12
Aultman Health Foundation p9
B
Baptist Health System p4
Becton, Dickinson & Co. p12
Berna Biotech p11
Bestewil Holding p12
Boston Scientific p1
Bright Now! Dental p10
BriteSmile p10
Brookdale Senior Living p8
Buckeye Community Health Plan p9
C
Cannon Falls Community Hospital p4
Canyon Creek Development, LLC p9
CAPE Health Plan p9
Capella Healthcare p4
Capital Senior Living p9
CareFirst Medical Associates, PA p9
CareMore Medical Enterprises p9
CB Richard Ellis p9
Cellpep, SA p11
Centene Corp. p9
CHA Health p9
CHA HMO, Inc. p9
Cherokee Baptist Medical Center p4
Cleveland Clinic—Naples Hospital p4
Comanche County Memorial Hospital p4
Community Health Systems p4
Copper Hills Youth Center p3
CorSolutions p4
Crucell, NV p11
Crystal Cove Partners p9
Cypress Town Village of Oklahoma p9
D
DeKalb Baptist Medical Center p4
Desert Pain Medicine Group p9
Discus Dental p10
DUSA Pharmaceuticals p13
E
East Texas Pain and Rehab p9
Edwards Lifesciences Corp. p2
eMedicine.com p12
Eye Institute of Nevada p10
F
Facet Technologies p4
Formation Capital, LLC p8
G
GE Healthcare Financial Services p9
GeneOhm Sciences p12
Generations Management p9
Gentiva Health Services p3
GlaxoSmithKline p11
Goldman, Sachs p11
Great Expressions Dental Centers p10
Greenbriar Care Centers p9
Guidant Corporation p1
H
HCLB, Inc. p9
Health Management Associates p4
HIP Health Plan of New York p9
Horizon Health Corp. p3
Humana p9
I
InnoSpine p12
INNOVA Health p9
Innovative Surgical Solutions p10
IPC—The Hospitalist Co. p9
IVAX Corp. p13
J
Johnson & Johnson p1
JPMorgan p9
K
Kids Behavioral Health p3
Kohl Partners p9
Kremer ASC p10
Kyphon p12
L
Laurel Healthcare, LLC p8
Liberty Eye Surgical Center p10
Lifeline Systems p10
Lonza Group p13
M
M&T Bank p9
Matria Healthcare p4
Mayo Health System p4
MediPlan Corporation p9
Medtronic p2
Molina Healthcare p9
Montigen Pharmaceuticals p13
MorphoSys AG p11
N
Nationwide Health Properties p9
Network for Medical Communications & Research p10
New Mountain Capital p10
Newport Richey Capital p9
Norwood Immunology p11
Novartis AG p11
P
PainCare Medical Holdings p9
Paul Royalty Fund p13
PerfectHealth p9
Pfizer p13
Piper Jaffray & Co. p12
PlasmaSol Corp. p13
PracticeXpert p12
Prime Healthcare Service p4
Procyon Biopharm p11
Psychiatric Solutions p3
R
REC, Inc. p9
Royal Philips Electronics p10
S
sanofi-aventis p13
Serono, SA p11
Serotec Group p11
Shepherd Eye Center p10
Sherman Oaks Hospital p4
Simmons Vedder & Company p9
Sirius Laboratories p13
Southwestern Medical Center p4
St. Jude Medical p2
Stryker Corp. p13
SuperGen p13
SurgCenter Development p10
Surgery Centers of America p10
Surgis, Inc. p10
T
Teva Pharmaceutical Industries p13
The Cleveland Clinic p4
The Healthfield Group p3
The Schuster Group p4
TLC Vision Corp. p10
Transcend Services p12
Trubion Pharmaceuticals p10
U
UBS Securities p12
UCB Group p13
United Surgical Partners p10
V
Virosome Biologicals Limited p12
W
WebMD Corporation p12
Wellington Group p9
Wellstone Regional Hospital p3
Whitehouse Physical Therapy p9
Wyeth p10
|
To The Winners Go The Spoils... Boston
Scientific’s $27 Billion Bid for Guidant Trumps Johnson & Johnson’s While
Abbott Laboratories Lands Itself a Strong Vascular Business
Email Editor
Knowing when to hold ‘em and knowing
when to fold ‘em are useful skills in more games than just poker. The
bidding war for Guidant Corporation (NYSE: GDT), raging over the
past two months, has finally come to an end with Guidant’s board accepting
Boston Scientific’s (NYSE: BSX) offer of $80 per share, or a total
of $27 billion. Unwilling to match or better its December 2004 offer of
$76.00 per share, or $25.4 billion, a figure that it subsequently lowered
to $21.5 billion, Johnson & Johnson (NYSE: JNJ) found a way to quit
Guidant and walked away with the consolation of a $675 million breakup
fee.
Under terms of the revised, final deal, Boston Scientific is committing to
pay $42.00 in cash and $38.00 in shares of BSX common stock for each share
of Guidant stock. This deal offers GDT shareholders a healthy $9.00, or
12.6% premium, over JNJ’s last-known bid of $71.00 per share. The $27
billion price tag translates into acquisition multiples of 7.3x revenue
and 27x EBITDA, a very rich deal indeed when we look at other recent
transactions in the Medical Device sector.
This bold $80-per-share offer was meant to present Guidant’s board with an
offer it couldn’t refuse and to preclude a more generous counteroffer from
JNJ, thereby bringing the bidding war to a definitive halt.
Once this deal closes, a combined Boston-Guidant would trail only
Medtronic (NYSE: MDT) and become the second-largest pure-play medical
device company in the world, with total revenue of $9.0 billion. The newly
combined company will have the number one position in coronary stents and
number two position in implantable defibrillators.
They’ve won the war, but can they win the peace? By almost any measure,
this is a risky deal for BSX. It is taking on substantial debt for a
company its size, possibly jeopardizing its credit rating and dampening
profitability until 2009.
Abbott Labs Makes An Assist
With a deal this massive, Boston Scientific faced a number of challenges.
One is the antitrust concerns that would be raised over grafting Guidant’s
vascular business on to its own. Another is how to finance such a big
deal. They decided to kill two birds with one stone, by selling off the
GDT vascular intervention and endovascular businesses to Abbott
Laboratories (NYSE: ABT) in exchange for a three-pronged financing
package.
First, Abbott will pay $4.1 billion, or 4.1x revenue, to buy the Guidant
vascular business lines. As part of the terms, ABT has also agreed to pay
up to $500 million extra in milestone payments, contingent on the
development and regulatory approval of certain vascular technologies in
the United States and Japan.
Since this side-deal was predicated on BSX snagging GDT, the transaction
is now in effect. This acquisition will ensure ABT a strong market
position for such vascular devices as drug-eluting stents.
The second part of the financing package is for Abbott Labs to float
Boston Scientific a $900 million interest-bearing loan.
Third, Abbott will acquire approximately 56 million shares of BSX stock—a
4% stake in the company—for about $1.4 billion. The cumulative effect of
these component deals (not counting the milestone payments) is to direct
$6.4 billion in cash to BSX.
Abbott is willing to pony up this much cash because it too is killing two
birds with one stone. It is reinforcing its own stent business with the
addition of Guidant’s, while keeping it out of the hands of competitor JNJ.
Johnson & Johnson may still cast about for other deals in the Medical
Devices sector so it can diversify and prop up a waning growth rate that
is threatened in the near term by competition from generic pharmaceutical
competitors. Two possible acquisition candidates noted in the media are
cardiovascular device companies: St. Jude Medical (NYSE: STJ) and,
more remotely, Edwards Lifesciences Corp. (NYSE: EW).
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