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Just three weeks after Johnson & Johnson finally seemed ready to complete its roller-coaster merger with Guidant Corp., another suitor for the troubled medical device maker has roiled the waters with a $25 billion bid. Boston Scientific Corp. disclosed Monday it is willing to pay $72 a share for Guidant — a 14 percent premium over J&J’s latest offer — and to divest a large chunk of the company where the companies have overlapping product lines. The new bid comes just weeks after J&J and Guidant settled on a lower offer that quelled a legal dispute between the companies. Two key Guidant executives also recently retired, perhaps signaling that their work to see the deal through was finally done. Boston Scientific officials said Monday their main interest is Guidant’s cardiac implant business, known as CRM, or cardiac rhythm management. The overall sector is booming, posting up to 30 percent annual sales growth in recent years, according to data from investment research firm Morningstar Inc. of Chicago. Indianapolis-based Guidant was particularly successful until the death of a young patient this spring, which triggered a series of product recalls and subsequent investigations and lawsuits throughout the year. The troubles sent sales tumbling this summer, although analysts and Guidant officials expect the numbers to rebound. Still, the problems spurred J&J to rescind in early November its original $25 billion offer, made nearly a year ago. Guidant sued for breach of contract, and the companies settled Nov. 15 on a lower price tag of $21.5 billion in cash and stock, or about $63 per Guidant share. Now Boston Scientific has matched the price of the original J&J offer, forcing J&J to revise its bid or perhaps stand pat and hope Guidant, already thankful that J&J is still in the game, will accept a lower price for a more familiar suitor. “Boston Scientific is quite savvy coming in with a substantial premium,” says Morningstar analyst Debbie Wang, who priced Guidant at $51 a share even before J&J lowered its bid. “They’re forcing Guidant’s board and interim CEO to seriously look at the offer.” Meanwhile, Guidant’s legal problems haven’t gone away. But Boston Scientific officials said on a conference call they’ve done a thorough legal and regulatory review and feel the problems are manageable. The company said it would address antitrust concerns by divesting Guidant’s vascular intervention and endovascular businesses but keep shared rights to Guidant’s drug-eluting stent business. It’s unclear how Boston Scientific would resolve the marketing partnership between Guidant and J&J. The two companies co-promote J&J’s Cypher stent, which is a direct competitor to Boston Scientific’s Taxus stent. Boston Scientific has dealt with its own recall problems, most recently fixes to its Taxus stent in the summer of 2004. Those recalls seemed to be in the past, although a Wall Street Journal article last month questioned whether all problems were thoroughly resolved. In a formal proposal dated Monday and addressed to Guidant chairman James Cornelius, Boston Scientific executives tout their track record of growth through acquisition. Under the proposal, Guidant shareholders would still own 35 percent of the combined company. They also note that Bank of America Corp. and Merrill Lynch & Co. have committed to provide financing for the transaction, which addresses Boston Scientific’s ability to close the proposed transaction. Boston Scientific’s bid was a surprise, but even more unusual was the timing. It comes a week after a second Guidant executive, who was intimately involved with the J&J deal, stepped down from the company. On Nov. 30, the company announced that COO Guido Neels was retiring, effective immediately. Two weeks before, CEO Ronald Dollens retired. He was supposed to step down in 2004, but agreed to stay on to see the J&J deal through. Now Boston Scientific’s bid ensures that the J&J takeover isn’t a done deal after all. “It’s quite unusual,” said Dick Langan, who runs the business and finance department at Nixon Peabody in New York. “I haven’t seen it occur, at least on a deal of this magnitude.” In midafternoon trading, Boston Scientific shares were down 55 cents or 2 percent to $26.78. Guidant shares were up $5.45 or 8.8 percent to $67.27. Johnson & Johnson shares were down 11 cents or 0.2 percent to $61.10. Shearman & Sterling in New York are legal counsel to Boston Scientific. Merrill Lynch & Co., Bear, Stearns & Co. and Banc of America Securities LLC are Boston Scientific’s financial advisers. Copyright �2005 TDD, LLC. All rights reserved.

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