Big winner in Guidant deal: Minnesota

The new, larger Boston Scientific Corp., the one that just swallowed Guidant Corp., will sweep across the northern suburbs of the Twin Cities from Maple Grove and Plymouth in the west to Arden Hills in the east.

Boston Scientific's $27 billion acquisition Wednesday fortifies its position as a powerhouse in the medical devices industry, which probably will bode well for the 6,900 employees who work on the respective campuses of the two companies.

"This is a table pounder," said Dhulsini de Zoysa, a market analyst for SG Cowen & Co. "We believe that Guidant's strategic value to Boston Scientific is compelling. We expect the company to be a cardiovascular powerhouse, worth more together than each on a stand-alone basis."

The Boston Scientific-Guidant deal was announced Wednesday morning, hours after the deadline expired for health care giant Johnson & Johnson to submit a rival offer.

The agreement ended three weeks of corporate intrigue and maneuvering as Natick, Mass.-based Boston Scientific outbid and outlasted J&J, which started down the Guidant acquisition path more than a year ago. The Guidant auction played like a drama in which the company became more valuable to its suitors despite the bad publicity that followed a series of pacemaker and defibrillator recalls, regulatory inquiries, consumer lawsuits and sliding earnings.

Boston Scientific's offer was valued at $80 a share, compared with J&J's $24.2 billion offer at $71 a share. The final deal still requires regulatory and shareholder approval. The two companies hope to close by March 31.

Boston Scientific's successful acquisition of Guidant and its pacemaker and defibrillator lines immediately raised speculation that a spurned J&J would turn its interest elsewhere in the field of cardiovascular devices. Speculation is that St. Jude Medical Inc., based in Little Canada, is the prime contender. St. Jude officials declined to comment Wednesday when asked whether the company was for sale.

The combined Boston Scientific-Guidant company appears favorable for their Minnesota employees. Both companies support manufacturing and research-and-development (R&D) operations in the Twin Cities. There is little overlap in their product lines, analysts said. The combined strength and prominence of the two companies could strengthen the Twin Cities presence in the field.

"The brains are here"

"For sure it means increased effort on the R&D side," said Don Gerhardt of Medical Alley, a Twin Cities trade organization. "The brains are here, the patents are here, the expertise is here."

The market for stents and heart rhythm devices in baby boomers and emerging markets such as China bode well for job growth, Gerhardt said. That is good news for the region because such jobs pay an average of $60,000 a year and create spin-off jobs, he said.

Boston Scientific has 3,600 employees in the Twin Cities at facilities in Plymouth and Maple Grove, where the cardiovascular division is based. When Boston Scientific merged with SciMed Life Systems in 1995, there were 1,700 employees.

Employment has risen in recent years because of the introduction of the drug-coated stent Taxus, which was one of the largest medical device introductions in history. Taxus is made in Maple Grove.

Last October, the company opened a $50 million R&D center at the company's Weaver Lake Road complex.

Guidant continues to expand its sprawling 100-acre campus in Arden Hills, where about 3,300 people work. In the past two years, employees have moved into a new learning and development center, as well as an old Control Data Building and the former Arden Woods building, which were purchased to accommodate the company's growth.

Kingshuk Sinha, academic director of the Medical Industry Leadership Institute at the University of Minnesota's Carlson School of Management, said Boston Scientific will be "a very important player" in the treatment of cardiovascular disease.

A blessing for the Twin Cities

Sinha called the merger a blessing for the Twin Cities. "And there's more coming down the pike in terms of new technology and in meeting the needs of unserved and underserved populations," he said.

Sinha said the growing demand for cardiac devices is a worldwide phenomenon brought on by changes in lifestyle as people become more sedentary and less healthy.

"Cardiovascular disease is not just a disease of the old," he said. "It's a public health epidemic that doesn't get discussed much. It is going through the roof from ages 15 to 60. Demand will grow and this bodes well for the Twin Cities and its medical community. Production and R&D are going to get healthier."

Analyst Jan David Wald of A.G. Edwards said the two companies work on different products in the Twin Cities and will complement each other by "cross fertilizing" their respective expertise.

Wald said the jobs with Guidant's stent business, which is being sold to Abbott, are in California, so that won't affect Guidant's Minnesota operation.

Wald predicted relatively smooth sailing for Boston Scientific and Guildant with the Federal Trade Commission's regulatory review. He also expected the deal to get done by the end of the first quarter because there is a penalty payable to shareholders for each day that closing extends beyond March 31.

"This deal compensates shareholders," Wald said. "If you had asked me before all of this happened what I would want for Guidant, I would have said between $76 and $80. They got the high end."

Shares in Boston Scientific and Indianapolis-based Guidant declined 46 cents and $1.59 to close at $23.54 and $75.19, respectively, amid Wall Street concerns that the deal will dilute Boston Scientific's earnings.

Star Tribune staff writer Janet Moore contributed to this report. David Phelps • 612-673-7269