Boston Scientific swallows Guidant:

January 1, 2007

Massachusetts-based Boston Scientific Corp. finally sealed its purchase of Indianapolis medical device maker Guidant Corp. in April. But it was still paying a price for the $27-billion deal as 2006 wound to a close.

Boston Scientific shares have tumbled since the deal closed, partly because of concern that its signature product, drugcoated stents that prop open obstructed heart vessels, can sometimes cause fatal blood clots.

But many of the company's difficulties relate to product-liability problems at Guidant, one of the leading makers of defibrillators-pager-size devices that deliver an electric shock to correct a heartbeat gone awry.

In June, Boston Scientific announced recalls or warnings on nearly 50,000 Guidant cardiac devices and said it could take as long as two years to fix safety problems.

Boston Scientific was tenacious in pursuit of Guidant, ultimately breaking up a late 2004 deal the Indianapolis company had struck to be acquired by New Jerseybased Johnson & Johnson.

J&J originally agreed to pay $25.4 billion for Guidant. But it scaled back its offer to $21.5 billion after Guidant disclosed recalls and legal problems stemming from defibrillator defects.

That, in turn, gave Boston Scientific an opening.

To get Guidant to cancel its deal with J&J, Boston Scientific ultimately boosted its offer to $27 billion, which translated to $80 a share.

Since then, Boston Scientific has watched the price of its stock drop nearly 40 percent.

Fortune magazine this fall called the acquisition "the second worst deal ever," behind only America Online's $102 billion purchase of Time Warner.
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