Acquisition financing: New weapons in pharma wars
Funding from Abbott Laboratories for Boston Scientific’s bid for Guidant could set an important precedent.
The battle between Johnson & Johnson and Boston Scientific to acquire Guidant is still heating up. However, regardless of the outcome, the financing strategies used by Boston Scientific might open new frontiers for M&A. Most significantly, the offer from Boston Scientific includes a loan commitment from fellow US medical products company Abbott Laboratories, which is also on board to buy certain Guidant assets should the Boston Scientific bid be successful.
This is the first time corporate-to-corporate lending – not in the form of vendor financing – has been a critical element of a major acquisition bid, and could offer a new financing strategy to further M&A deals.
Johnson & Johnson signed a deal in December 2004 to purchase medical device maker Guidant for $76 a share. However, the US conglomerate opened the door to counter-bids by lowering its offer to $63.08 a share last November after Guidant began facing product recalls that pushed its value down.
Enter Boston Scientific. The firm launched a number of counter-offers and finally managed to get a nod from Guidant in mid-January with a bid for $80 a share – in a response to Johnson & Johnson’s increasing its offer to $71.