Guidant
Encyclopedia
Boston Scientific
The Boston Scientific Corporation , is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, neuromodulation, neurovascular intervention,...
and Abbott Labs, designs and manufactures artificial pacemaker
Artificial pacemaker
A pacemaker is a medical device that uses electrical impulses, delivered by electrodes contacting the heart muscles, to regulate the beating of the heart...
s, implantable defibrillators, stent
Stent
In the technical vocabulary of medicine, a stent is an artificial 'tube' inserted into a natural passage/conduit in the body to prevent, or counteract, a disease-induced, localized flow constriction. The term may also refer to a tube used to temporarily hold such a natural conduit open to allow...
s, and other cardiovascular medical products. Their company headquarters is located in Indianapolis
Indianapolis, Indiana
Indianapolis is the capital of the U.S. state of Indiana, and the county seat of Marion County, Indiana. As of the 2010 United States Census, the city's population is 839,489. It is by far Indiana's largest city and, as of the 2010 U.S...
, Indiana
Indiana
Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...
. Their main competitors are Medtronic
Medtronic
Medtronic, Inc. , based in suburban Minneapolis, Minnesota, is the world's largest medical technology company and is a Fortune 500 company.- History :...
, St. Jude Medical
St. Jude Medical
St. Jude Medical, Inc. is a $16 billion global medical device company, with headquarters in Little Canada, Minnesota, United States, a suburb of St. Paul. The company sells products in more than 100 countries and has over 20 operations and manufacturing facilities worldwide. Its principal...
, and Johnson and Johnson.
Acquisition/merger
In February 1972, Cardiac Pacemakers Inc. (CPI) of St. Paul, Minnesota was formed. CPI was a highly successful start up venture, increasing sales from zero in 1972 to over $47 million and highly profitable when it was acquired by Eli LillyEli Lilly and Company
Eli Lilly and Company is a global pharmaceutical company. Eli Lilly's global headquarters is located in Indianapolis, Indiana, in the United States...
in 1978 for $127 million. During the 1970s, Lilly acquired other medical device companies including IVAC of San Diego, Physio Control of Redmond WA, and Advanced Cardiovascular Systems of Santa Clara, CA. These companies formed the core product/therapy areas of the Medical Devices Division of Eli Lilly and Company.
In 1994, Lilly had a change in senior management and Randy Tobias, the new president & CEO, decided that Lilly would focus on its pharma and other related businesses. The Medical Devices Division was spun off and went public in late 1994 under the name of Guidant. The new company focused on cardiac rhythm management (pacemakers and implantable defibs) and cardiac and vascular intervention products via coronary and peripheral stents, guidewires and balloon dilitation catheters. Less invasive heart surgery was another small business unit of Guidant.
Johnson & Johnson announced that it was acquiring Guidant on December 15, 2004, for $76 a share, at a cost of $25.4 billion. The deal was approved by Guidant stockholders on April 27, 2005. On May 25, Guidant reported 26 cases of implantable defibrillator failure, including one death. The same day, the New York Times published an article accusing Guidant of waiting years before notifying physicians about the problems. On June 17, Guidant issued a safety advisory on seven models of defibrillator, followed a week later by advising doctors to discontinue use of four models. The scope of the problems steadily increased, and on July 18, 2005, Guidant issued a warning for nine different models of pacemakers from 1997 to 2000. The next day, Johnson & Johnson warned that the acquisition may be delayed due to these issues. On September 22, Guidant issued safety advisories and recalls for 170,000 of their pacemakers, 56% of their total pacemakers. On October 18, Johnson & Johnson gave an announcement that they were exploring alternatives to the acquisition, followed by a November 2 warning that they might pull out of the deal due to the regulatory issues and legal liabilities.
On November 7, 2005, Guidant sued Johnson & Johnson to force them to complete the deal. On November 15, the two companies announced a renegotiated purchase price of $63 a share, or $21.5 billion, a 15% price reduction. On December 5th, 2005, Boston Scientific
Boston Scientific
The Boston Scientific Corporation , is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, neuromodulation, neurovascular intervention,...
made a surprise unsolicited $24.6 billion bid to acquire Guidant, offering $72 per share of Guidant, $36 in cash and a fixed number of Boston Scientific shares valued at $36 a share. Guidant's stock price rose 10% on the news. The offer was not actually finalized until after due diligence had been completed on January 8, 2006.
On January 11, 2006, Johnson & Johnson presented a counteroffer of $23.2 billion, still less than their original 2004 bid, which the Guidant board accepted. The next day, Boston Scientific increased their bid to $25 billion, followed the next day by Johnson & Johnson increasing their bid to $24.2 billion. It was not until January 17 that Boston Scientific produced a new offer of $27.2 billion ($80 per share), with the help of Abbott Laboratories
Abbott Laboratories
Abbott Laboratories is an American-based global, diversified pharmaceuticals and health care products company. It has 90,000 employees and operates in over 130 countries. The company headquarters are in Abbott Park, North Chicago, Illinois. The company was founded by Chicago physician, Dr....
. Abbott agreed to purchase $1.4 billion of Boston Scientific stock and pay $4.1 billion for Guidant's vascular intervention business upon completion of the merger. Without Abbott's financial assistance, it would have been unlikely that Boston Scientific could have produced the counteroffer.
On January 25, 2006, after Johnson & Johnson refused to raise their bid higher than $24.2 billion, Guidant declared Boston Scientific's offer "clearly superior" and accepted their bid. Guidant paid a $705 million termination fee
Termination fee
A termination fee is a charge levied when a party wants to break the term of an agreement or long-term contract. They are stipulated in the contract or agreement itself, and provide an incentive for the party subject to them to abide by the agreement....
to Johnson & Johnson.
On April 21, 2006, the deal with Boston Scientific was complete. This deal included Abbott Labs buying the vascular intervention business of Guidant for approximately $4.5 billion. Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
magazine characterized the deal as the second worst deal ever, stating that the company paid too much for Guidant. On July 27, 2006, Boston Scientific posted a loss of $4.26 billion for the quarter.
Locations
- IndianapolisIndianapolis, IndianaIndianapolis is the capital of the U.S. state of Indiana, and the county seat of Marion County, Indiana. As of the 2010 United States Census, the city's population is 839,489. It is by far Indiana's largest city and, as of the 2010 U.S...
, IndianaIndianaIndiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...
(world headquarters) - Redmond, WashingtonRedmond, WashingtonRedmond is a city in King County, Washington, United States, located east of Seattle. The population was 54,144 at the 2010 census,up from 45,256 in 2000....
(Cardiac Rhythm Management) - Santa ClaraSanta Clara, CaliforniaSanta Clara , founded in 1777 and incorporated in 1852, is a city in Santa Clara County, in the U.S. state of California. The city is the site of the eighth of 21 California missions, Mission Santa Clara de Asís, and was named after the mission. The Mission and Mission Gardens are located on the...
, CaliforniaCaliforniaCalifornia is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
(Vascular Intervention, Endovascular Solutions, Cardiac Surgery) - Arden HillsArden Hills, MinnesotaAs of the census of 2000, there were 9,652 people, 2,959 households, and 2,228 families residing in the city. The population density was 1,087.3 people per square mile . There were 3,017 housing units at an average density of 339.9 per square mile...
, MinnesotaMinnesotaMinnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
(Cardiac Rhythm Management) - TemeculaTemecula, CaliforniaTemecula is a city in southwestern Riverside County, California, United States with a population of 100,097 according to the 2010 United States Census, making it the lowest populated American city over 100,000 population. It was incorporated on December 1, 1989...
, CaliforniaCaliforniaCalifornia is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
(Vascular Intervention) - ClonmelClonmelClonmel is the county town of South Tipperary in Ireland. It is the largest town in the county. While the borough had a population of 15,482 in 2006, another 17,008 people were in the rural hinterland. The town is noted in Irish history for its resistance to the Cromwellian army which sacked both...
, IrelandIrelandIreland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
(Manufacturing) - DoradoDorado, Puerto RicoDorado is a small tourist town in the northern coast of Puerto Rico, west of San Juan and is located in the northern region of the island, bordering the Atlantic Ocean, north of Toa Alta, east of Vega Alta, and west of Toa Baja. Dorado is spread over five barrios and Dorado Pueblo...
, Puerto RicoPuerto RicoPuerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
(Manufacturing) - GalwayGalwayGalway or City of Galway is a city in County Galway, Republic of Ireland. It is the sixth largest and the fastest-growing city in Ireland. It is also the third largest city within the Republic and the only city in the Province of Connacht. Located on the west coast of Ireland, it sits on the...
, IrelandIrelandIreland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
(Manufacturing)