Big deals: we look at Indiana's largest mergers and acquisitions. Also, why are so many smaller deals getting done?

Author:Kaelble, Steve
Position:Cover Story

INDIANA'S RECENT MERGER and acquisition news has played out like the wedding scene in a soap opera. One suitor is jilted at the altar as another bursts in. Just as the new pair prepare to take their vows, the sheriff knocks on the chapel door. Like a good soap, the episode ends on a cliffhanger as the credits roll (and this magazine goes to press).

The players in this drama, which has unfolded over the past several months, are Indianapolis-based cardiovascular device maker Guidant Corp. and would-be acquirers Johnson & Johnson and Boston Scientific Corp. Johnson & Johnson originally proposed acquiring Guidant in December 2004, and the deal was nearly complete when Boston Scientific entered the fray a year late with a sweeter offer. The tussle ended in late January when Guidant sent J&J packing and agreed to a $27 billion acquisition by Boston Scientific.

Complicating the story have been product-liability issues. Guidant is facing lawsuits relating to recent recalls of its defibrillators and pacemakers. Those troubles had muddied the J&J deal even before Boston Scientific came into the picture, causing J&J to lower its bid from $25.4 billion to about $22 billion. Boston Scientific came to the rescue and eventually bid the acquisition price even higher than Johnson & Johnson's original proposal, despite Guidant's troubles.

But the story may not be quite over yet. A couple of days after Boston Scientific's bid was accepted, federal regulators announced that they had discovered problems in the company's quality control. The rare announcement could slow new product approvals at Boston Scientific, and while it does not necessarily jeopardize the Guidant deal, it could make it more costly if Boston Scientific's stock price remains below the bottom threshold of a "collar" provision designed to protect Guidant shareholders. The provision would force Boston Scientific to hand over more of its shares to Guidant to compensate for a lower-than-expected stock price. So, stay tuned!

Another major Indiana deal was done with far less drama just before the ball dropped to end 2005. Indianapolis-based health-insurance giant WellPoint Inc. completed its $6.5 billion takeover of WellChoice Inc. of New York. The acquisition further bolsters WellPointh position as the largest publicly traded commercial health-benefits company in the country in terms of membership. It now serves some 34 million members through Blue Cross and Blue Shield operations in 14 states as well as non-Blue operations elsewhere. It now has more than 42,000 employees.

The next big deal of 2005 was one of those unfortunately all-too-common Indiana M&A tearjerkers--stories in which we must bid farewell at the end to a longtime Indiana corporate headquarters and name. Last July, Great Lakes Chemical Corp. left the chapel and the state in the arms of Crompton Corp., a specialty chemicals marketer based in Connecticut. Great Lakes--founded in West Lafayette and more recently headquartered in Indianapolis--had for years been a leader in specialty chemicals. The company resulting from the $1.4 billion deal calls itself...

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