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J&J lets Guidant deadline pass by

Boston Scientific is now apparently free to buy device maker

(Correction: Because of a reporting error, stories on Boston Scientific Corp.'s acquisition of Guidant Corp. in the Jan. 24, 25, and 27 Business sections contained an incorrect figure for the minimum price Boston Scientific stock must maintain to keep the deal's value from decreasing for Guidant shareholders. The share price must remain at $22.62 or higher.)

A midnight deadline in the bidding war for Guidant Corp. slipped by last night with no word from healthcare giant Johnson & Johnson, leaving Boston Scientific Corp. apparently free to buy Guidant today for $27 billion.

After a fierce bidding war, Guidant's board of directors last week called Boston Scientific's offer ''superior" to Johnson & Johnson's $24 billion deal, triggering a grace period that gave Johnson & Johnson five days to revive its deal. That period expired overnight, meaning Guidant can now drop the earlier deal and sign with Boston Scientific.

If the deal is cleared by federal antitrust regulators and approved by Guidant shareholders, the purchase would make Boston Scientific the world's biggest heart device company, and give it a victory over a much larger rival.

A spokesman for Boston Scientific did not comment last night. A spokesman for Johnson & Johnson could not be reached after the deadline had passed.

If Boston Scientific and Guidant sign a deal today, it would mark a conclusion to a public bidding war that surprised Wall Street and the life-science industry, in which most acquisitions are consummated behind closed doors.

Johnson & Johnson had planned to buy Guidant for about $25 billion, but hammered the price down below $22 billion last November after Guidant suffered a series of product recalls. Starting in December, Boston Scientific took the opportunity to jump in with a series of higher offers hoping to woo Guidant's board to break their deal.

By letting the contest go to the wire, Johnson & Johnson kept Wall Street guessing. Its executives refused to discuss the Guidant deal at an earnings meeting yesterday morning, and as the midnight deadline approached, stockholders and investment analysts waited anxiously to see whether the healthcare giant was bowing out of the fight, or was just playing a high-stakes game.

''The less time they give Boston Scientific, the worse it is for Boston Scientific. They have less time to react," said Jan Wald, a medical device analyst for A.G. Edwards & Sons.

Both companies want Guidant for its line of tiny defibrillators, devices implanted in the chest to prevent cardiac arrest. Guidant is the number two player in a $6 billion defibrillator market projected to grow significantly in the next few years.

Guidant also has a promising research program in drug-coated stents, an arena in which both Boston Scientific and Johnson & Johnson are now the only American competitors. Guidant disclosed yesterday that its drug-coated stent could be approved in Europe as soon as next week.

In the bidding for Guidant, Boston Scientific seized the upper hand last Tuesday by offering to buy the firm for $80 a share -- far higher than Johnson & Johnson's standing offer of $71 a share.

Boston Scientific has been fighting Wall Street perceptions that it will have trouble growing now that its $3 billion stent business is leveling off. Though much larger, Johnson & Johnson is also looking for new growth from its medical devices division.

Yesterday morning Johnson & Johnson reported its results for fiscal year 2005, which showed lower sales than analysts had expected.

Johnson & Johnson's shares lost $1.82 yesterday, dropping from $61.19 to $59.36. Because its bid for Guidant is about half cash and half stock, the offer loses value every time the firm's stock slides.

Boston Scientific's bid, at $42 in cash and $38 in stock, contains a mechanism to ensure that the value of the stock portion stays constant unless it slips below $22.62 per share. It closed yesterday at $24, its highest since the company made the $80 bid.

Guidant stock climbed slightly, from $76 to $76.78, suggesting investors anticipated at least a $77 offer from Johnson & Johnson.

Regardless of what happens now, there is still deep uncertainty about who will end up with Guidant, analysts say.

Johnson & Johnson has suggested that it could tie up a Boston Scientific deal with patent lawsuits. Any new purchase agreement on either side could, in theory, be trumped by a still-higher bid.

And the silence last night left open the possibility that, despite the deadline, Johnson & Johnson was still in the hunt.

''It's possible that Johnson & Johnson and Guidant have buried themselves in a room," says Randy Katz, a healthcare acquisitions lawyer based in California. ''The fact that nobody has spilled the beans yet doesn't mean that there aren't any beans to spill."

Stephen Heuser can be reached at sheuser@globe.com.

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