January 29, 2006
Guidant Acquisition Not a Done Deal
Boston Scientific offer of $80 a share for Guidant may not be the final chapter in the bidding war between Boston Scientific and Johnson and Johnson. First, Boston Scientific's very generous offer has put additional downward pressure of its already falling stock price. Hedge funds and other speculators could purchase Boston Scientific stock, block the the deal from closing, and hope to profit on an immediate stock price increase. Second, Boston Scientific has its own problems with regulatory authorities on its products and this additional negative pressure on its stock price is causing the stock exchange portion of the price to hit the lower price collar, limiting the number of shares Boston Scientific has to tender to close the deal. The offer will fall in value to below $80 once the collar is triggered. At that time, Guidant has the option of not closing on the deal.
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