The Guidant Auction Continues

So here we are again -- one of Guidant's (NYSE:GDT) suitors has raised the stakes again in the hopes of making this somewhat troubled medical device maker its own. Excuse me while I briefly climb atop my soapbox, but I really hope this deal gets done soon and just goes away.

In this most recent round, Johnson & Johnson (NYSE:JNJ) has once again upped and altered its bid for Guidant. J&J is now offering $37.25 in cash and 0.493 shares of stock for each share of Guidant -- an offer that values the target at about $68 per share. While that's still below Boston Scientific's (NYSE:BSX) offer of $72, the J&J bid does include a bit more cash ($37.25 per share versus $36).

Guidant's board of directors still appears to support and endorse the J&J bid, and that's a very important detail. While it's not impossible that Boston Scientific could win Guidant over the objections of the current board, that would be a long, drawn-out, and nasty process.

So which is the better deal? Although Boston Scientific's offer is $4 per share higher, that doesn't necessarily make it the best value. Either way, Guidant shareholders are going to be getting stock in the acquiring company, and unless they plan to sell out immediately, the fortunes of the purchasing company do play a big role in deciding which company is ultimately the better option.

For J&J, this would be a significant deal, but not overwhelmingly so -- the value of the present offer for Guidant represents about 13% of J&J's enterprise value. Furthermore, J&J has experience in making big deals and integrating them into the whole with past purchases such as DePuy (orthopedics), Cordis (cardiovascular products), and Centocor (biotech). J&J also happens to have close to $13 billion in net cash sitting in the bank.

Boston Scientific's offer would represent more than 110% of the company's current enterprise value. Furthermore, the company has about $900 million in cash on the balance sheet and more than $2 billion in debt -- a net negative cash position. So not only will Boston Scientific have to issue a lot of shares, thus diluting its current owners, but it will also take on considerable debt.

And let's not forget an important point: Guidant isn't exactly "plug and play." There's quite a bit of fixing up to do -- all while those interest payments come due. Honestly, as a J&J shareholder, I'd just as soon see the company make a play for St. Jude (NYSE:STJ) as fight on for Guidant, and there's also talk that J&J is considering a bid for Swiss drug company Serono (NYSE:SRA). Either way, though, I'd like a resolution. It's time for J&J management to get back to work running the business and stop hanging out with bankers.

For more Foolish thoughts on medical devices:

• Boston Scientific's Bold Move
• Guidant, J&J Kiss and Make Up
• All's Not Lost at Guidant

Fool contributor Stephen Simpson owns shares of Johnson & Johnson but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Motley Fool has a disclosure policy.