Indianapolis, July 30 (AP) - Guidant Corp. agreed to buy rival Cook Group Inc. for up to $3 billion in stock in a deal that would unite two developers of drug-coated stents, a nascent technology expected to be a key tool in the treatment of heart disease.
Under the deal announced Tuesday, Indianapolis-based Guidant will issue as many as 65 million new Guidant shares to pay for Bloomington-based Cook. The shares will priced in two phases: the first at a minimum of $40 per Guidant share, and the second at a $55 per-share minimum.
The merger, subject to shareholder and regulatory approval, is expected to close in early 2003.
Guidant shares rose $1.41, or 4 percent, to $36.39 in afternoon trading on the New York Stock Exchange.
Guidant has had several disappointments in its quest to be the first to market this next generation of stents, tiny metal-mesh tubes that inserted into coronary arteries to prop them open after surgery to clear blockages. The drug coating is supposed to help the stents prevent reclogging.
Guidant announced in March that it had halted development of one drug-eluting stent because it proved ineffective in clinical trials.
A different drug-coated stent Guidant took to market in a partnership with Cook under an agreement reached last year was blocked last month.
A federal judge in Illinois ruled June 13 that Cook did not have the right to sell the stents through third-party distributors such as Guidant. Judge Charles Kocoras ruled that the arrangement violated a previous licensing agreement between Cook, Natlick, Mass.-based Boston Scientific Corp., and Angiotech Pharmaceuticals of Vancouver, British Columbia.
Cook has said it would appeal the ruling.
Guidant also produces conventional bare-metal stents and other medical devices.
"This agreement is strategically important, as it adds clarity around our ability to fully participate in the drug-eluting stent market opportunity," said Ronald W. Dollens, Guidant's president and chief executive. "Each company brings product development, manufacturing and marketing expertise that will significantly enhance our business."
For the deal to go through, Guidant is obligated to achieve clinical and legal goals in its development of its new Achieve drug-eluting stent system.
Cook's founder and chairman, William A. Cook, said the 39-year-old company's philosophy had been to succeed as a privately held corporation.
"But now, it is time to make plans to protect the company's future and ensure that this legacy of innovation continues," Cook said.
Guidant was spun off from Indianapolis-based drug maker Eli Lilly and Co. in 1994. Guidant has more than 10,000 employees, with annual revenue of more than $2.7 billion last year.
Cook, founded in 1963, designs, manufactures and distributes medical devices for diagnostic and therapeutic procedures. It has about 4,400 employees worldwide, with total annual sales of more than $500 million, spokesman David McCarty said.
(Copyright 2002 by The Associated Press. All Rights Reserved.)