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January 11, 2006

Would you be mine? Could you be mine? Won't you be my neighbor?
It could have been ever so convenient. If only Guidant's Board had said "yes" to the Boston Scientific crowd. Guidant's heart rhythm group in Arden Hills could go to lunch with their new co-workers at the Taxus stent plant in Maple Grove, a mere 20 minute drive over US 94 in Minnesota. And the whole Guidant endovascular division could load into some buses and drive 20 miles up 101N to the Redwood City Seaport and sit on the dock of the SF Bay with their new Abbott Vascular friends. But Guidant decided to go with those guys from Joisey.

Of course, there's still 20 shopping days till Chri...till the shareholder meeting at which the owners of Guidant stock will vote for their Board's recommendation or not. Elliott Associates LP, hedge fund owner of 3 million of those Guidant shares, had recommended the Boston deal and was none too pleased with the Board's decision to go with J&J. Nancy Havens whose fund owns 2 million Guidant shares told Reuters, "I can't believe that Guidant said yes to this deal. It seems outrageous to me." As for Boston Scientific, they came right back with an 8:00pm press release boldly proclaiming, "Our discussions with Guidant are ongoing. We intend to vigorously pursue this transaction to its completion."

Given that 30% of Boston Scientific stock is owned by founders Pete Nicholas and John Abele, they could pretty quickly "up" their offer, or make some other changes more favorable to Guidant shareholders. So it's not over till at least somebody sings.

An interesting observation was made to Reuters by Allen Michel, an M&A prof at BU School of Management, who thinks that the winner of the contest will be the loser. "Whenever you have multiple bidding ... the firm that wins usually ends up paying too much. It's a phenomenon that's known on Wall Street as the 'winner's curse.'"

I too have a couple quick observations: (1) who would have thought that such a phenomenal billion-dollar-knock-down-drag-out bidding war would be going on over a company that only a month ago was generating headlines in the New York Times like, "More Deaths are Linked to Device"; and (2) what was it about the Boston Scientific deal that Guidant's Board didn't like? After all, Boston was offering $4 a share more than J&J, with a collar in case Boston's stock dropped below a certain level, and many assurances of financing, etc. The Wall Street Journal reported that Guidant's concerns "were said to deal with how Boston Scientific would divest itself of Guidant's stent and catheter businesses" to Abbott. There was no elaboration on this point and I can only wonder if what I discussed a couple of days ago might have been a factor, namely that since Guidant and Abbott have the only two FDA-approved carotid stents, wouldn't selling Guidant to Abbott cause some questions for the FTC regulatory review and possibly slow down the merger approval?

In conclusion, I'd just like to say that, in case any shoppers out there feel left out, I have a web site I might be interested in selling: it's very popular, read by 60,000 visitors a month, top search engine placement, all that good stuff. In fact, I could even mess it up a little and throw in a few mistakes if that would make it more attractive. Talk to me.

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