Elliott Associates Believes Guidant Bid by Boston Scientific Superior to Johnson & Johnson Offer
10 1월 2006 - 11:56PM
PR Newswire (US)
Shareholder Views 'Anything Less than $71 Per Share from J&J'
As Unacceptable NEW YORK, Jan. 10 /PRNewswire/ -- Elliott
Associates, L.P. (together with funds under common management), a
shareholder of Guidant Corporation (NYSE:GDT), today sent a letter
to the Board of Directors of Guidant. Elliott encourages other
shareholders to communicate publicly or privately to Guidant's
Board concerning their views regarding the superiority of the
Boston Scientific bid and the minimum acceptable level of
consideration that Johnson & Johnson must now offer to acquire
Guidant. The letter sent to Guidant's Board is as follows: January
10, 2006 Board of Directors Guidant Corporation 111 Monument Circle
29th Floor Indianapolis, Indiana 46204-5129 Dear Members of the
Board of Directors: I write to you on behalf of Elliott Associates,
L.P. and Elliott International, L.P. ("Elliott" or "we"), which
collectively own approximately three million shares of the common
stock of Guidant Corporation (the "Company" or "Guidant"). Elliott
strongly believes that the Boston Scientific offer of $72 per share
in cash and stock (the "Superior Offer") is superior to the Johnson
& Johnson ("J&J") cash and stock offer valued currently at
approximately $64.30.(1) In addition to consideration being
approximately 12% higher than that offered by J&J, Boston
Scientific has protected its offer's value through a collar around
the stock portion.(1) Further, Boston Scientific's Superior Offer
is not subject to any due diligence or financing, and the material
adverse condition language in the delivered merger agreement is
"essentially the same" as in the current merger agreement between
Guidant and J&J, putting its offer on equal footing with
J&J's.(2) Additionally, approximately 30 percent of Boston
Scientific's shareholders have agreed to vote in favor of the
transaction, easing any Boston Scientific shareholder vote
concerns. Finally, the fact that Boston Scientific has taken the
extraordinary step of entering into an agreement with Abbott
Laboratories to divest Guidant's vascular intervention and
endovascular solutions businesses this early in the process should
mitigate the incremental antitrust risk associated with Boston
Scientific's offer as compared to J&J's. The combination of
these factors overwhelmingly outweighs the facts that a transaction
with J&J would be able to close a couple of months earlier and
that it has already received antitrust clearance. It is beyond our
comprehension how J&J can view their current deal as being
superior to Boston Scientific's, and we would expect your view to
be the same.(3) In fact, for J&J to match Boston Scientific's
Superior Offer, it would have to offer no less than $71.00 per
share, in our opinion. Given the strength of Boston Scientific's
merger agreement and the lack of any antitrust issues, the only
difference between the two offers should be the time value of money
coupled with a very modest risk premium. Notably, J&J's own
press release mentions only three factors as to why it considers
its proposal superior to Boston Scientific's: (i) J&J's ability
to invest in Guidant's future; (ii) the "certainty and imminence"
of J&J's proposal; and (iii) J&J's historical record of
sales and earnings growth. While we have no doubt that J&J
would invest in Guidant's future, so will Boston Scientific, and
Guidant shareholders should be compensated for their current
holdings now -- promises of future investment do not justify
insufficient consideration today. Secondly, the "certainty and
imminence" of J&J's proposal only represents approximately a
two-month timing advantage, as Boston Scientific has already taken
necessary steps to expedite its closing and has gone to great
lengths to address any potential antitrust issues upfront. Finally,
J&J is facing a meaningful slowdown in future growth, absent
its pending acquisition of Guidant, while the combination of Boston
Scientific and Guidant would create a diversified medical device
powerhouse with revenues of $10 billion growing at annual
double-digit rates and deserving of meaningful earnings multiple
expansion over time. Should J&J propose to increase its offer
to $71.00 or higher, we urge you not to increase the current
breakup fee or agree to a "forced vote" provision as part of
entering into a new merger agreement. It is paramount that you, as
our fiduciaries, create an even playing field for both parties and
maximize the chances of Guidant's shareholders receiving the
highest possible value for their investment. As we communicated to
the Company shortly after the terms of the revised agreement with
J&J were disclosed, it continues to be our strong belief that a
$64 per share offer from J&J meaningfully undervalues Guidant.
Taking into account all of these factors, we strongly urge
Guidant's board to recognize the superiority of Boston Scientific's
offer versus J&J's and, just as importantly, to ensure a level
playing field should J&J increase its offer. Anything less than
$71.00 per share from J&J should not be accepted, in our view.
Finally, I would like to use this opportunity to extend my
gratitude to all the hard working Guidant employees who have
remained committed to the Company and its mission of developing
life saving cardiovascular devices despite recent problems and
negative press coverage. Should you have any questions, please do
not hesitate to contact me. Very truly yours, /s/ Ivan Krsticevic
Ivan Krsticevic Senior Portfolio Manager (1) Based on closing
prices as of January 9, 2006. (2) Per Larry Best, CFO of Boston
Scientific, on their conference call January 9, 2006. (3) As stated
in J&J's press release in response to Boston Scientific's offer
on January 8, 2006, "We continue to believe that the agreed upon
J&J deal represents a better offer for Guidant Corporation, its
shareholders and its employees than the recently announced Boston
Scientific proposal." About Elliott Associates, L.P. Elliott
Associates, L.P. and its sister fund, Elliott International, L.P.
have more than $5.6 billion of capital under management as of
January 1, 2006. Founded in 1977, Elliott Associates is one of the
oldest hedge funds under continuous management. The Elliott funds'
investors include large institutions, high-net-worth individuals
and families, and employees of the firm. DATASOURCE: Elliott
Associates, L.P. CONTACT: Scott Tagliarino for Elliott Associates,
L.P., +1-212-506-2999, +1-917-922-2364 (cell)
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