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« Shadegg for Majority Leader | Main | Legal Clinic »

Deals From Hell Just Keep Coming

Am I the only one who sees a replay of the Qwest-Verizon-MCI struggle in the current Boston Scientific-J&J-Guidant bidding war? J&J can always win this thing if it wants to - it just may not want to. And BSX is now offering substantially more than its own value, on its way to wrecking the combined balance sheet of the two companies.

Then there's this:

Some of Guidant's largest shareholders have protested what they believe is an unfair preference for J&J at the Guidant board level, despite what they regard as J&J's inferior offers. This suggests that a hostile bid might find backers among these groups.

That should also sound familiar.

Likewise, some are arguing that J&J needs Guidant because it has few other growth opportunities. I'm not certain that a profitable and growing company worth $180 billion needs any company worth about $25B.

There are some differences. For instance, Qwest had no outside help. In this case, Abbott Labs seems willing to fund BSX's escalating offers - at least to some extent - by agreeing to pay more for certain overlapping bits of Guidant that can't keep. But there are some limits, here, too. Abbott is only valued at about $65B, and certainly won't be looking to blow its entire roll of cash just block J&J. This isn't the Persian Empire bankrolling the Spartans.

I suppose there's that argument that something is worth what you can get for it, but people value companies for a reason, and J&J had excellent reasons for pushing down Guidant's price. Using the pre-deal list from Deals From Hell, I'd be a little worried about winning if I were a BSX shareholder. It's a bidding war for a public company, one that BSX has valued above itself, and which the board is clearly hoping will save the company. There are complex regulatory issues to be negotiated. And there will almost certainly be expensive buyouts and severance for senior- and middle-management. Speaking of management, with one exception there's very little management investment in BSX.

If J&J wins, they may be overpaying.

If BSX wins, they may soon be up for sale.

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  booklist

Power, Faith, and Fantasy


Six Days of War


An Army of Davids


Learning to Read Midrash


Size Matters


Deals From Hell


A War Like No Other


Winning


A Civil War


Supreme Command


The (Mis)Behavior of Markets


The Wisdom of Crowds


Inventing Money


When Genius Failed


Blink: The Power of Thinking Without Thinking


Back in Action : An American Soldier's Story of Courage, Faith and Fortitude


How Would You Move Mt. Fuji?


Good to Great


Built to Last


Financial Fine Print


The Day the Universe Changed


Blog


The Multiple Identities of the Middle-East


The Case for Democracy


A Better War: The Unexamined Victories and Final Tragedy of America's Last Years in Vietnam


The Italians


Zakhor: Jewish History and Jewish Memory


Beyond the Verse: Talmudic Readings and Lectures


Reading Levinas/Reading Talmud