Abbott Agreed to Buy St. Jude in $25 Billion Deal--4th Update
April 28 2016 - 8:35AM
Dow Jones News
By George Stahl
Abbott Laboratories agreed to acquire St. Jude Medical Inc. in a
cash-and-stock deal valued at $25 billion that would create one of
the leading makers of heart-related devices.
Under the deal, Abbott agreed to swap $46.75 in cash and 0.8708
shares for each St. Jude share. The offer values each St. Jude
share at about $85, representing a 37% premium to the stock's
closing price Wednesday.
Shares of Abbott fell 7.4% to $40.60 in premarket trading, while
St. Jude rose 25% to $77.70.
The companies said the deal merges St. Jude's strong positions
in heart-failure devices, heart catheters and defibrillators with
Abbott's strength in coronary intervention and heart-valve repair.
When combined, the merged company will have annual cardiovascular
sales of $8.7 billion.
The merger is occurring as heart disease becomes a bigger
problem. According to the companies, more than 40% of adults in the
U.S. are expected to have one or more forms of heart disease by
2040.
The boards from both companies have approved the transaction,
which still requires shareholder and regulatory approvals. The
companies expect the deal to close in the fourth quarter.
Abbott sees the deal adding to its adjusted earnings in the
first full year after closing. On a per-share basis, Abbott
estimates the buy increasing earnings by 21 cents in 2017 and 29
cents in 2018. The companies see sales and operational benefits of
$500 million by 2020.
In 2015, Abbott's sales rose 0.8% to $20.4 billion, and its
earnings nearly doubled to $4.4 billion, which included a gain from
the sale of discontinued operations. As of Wednesday, Abbott had a
market vale of $64.6 billion.
St. Jude's sales fell 1.4% to $5.54 billion in 2015, and its
earnings declined 12% to $880 million. The company's market value
was $17.6 billion.
Abbott's deal for St. Jude comes as the company is trying to
complete its $5.8 billion purchase of Alere Inc., the health-care
diagnostics company that is grappling with foreign corruption
probes.
Abbott agreed in February to pay $56 per share to acquire Alere,
a 51% premium to the company's share price before the deal's
announcement. Since then, Alere has disclosed it has received a
subpoena regarding a foreign corruption investigation over payments
in Africa, Asia and Latin America. The company also has missed a
deadline to file its 2015 annual report with regulators because it
is analyzing its revenue recognition in Africa and China over the
past three years.
Last week, Abbott Chief Executive Miles D. White declined to
affirm his commitment to the deal. Thursday, though, Abbott
discussed plans to issue $3 billion of stock "to rebalance its
capital structure" and help finance the Alere and St. Jude
deals.
Write to George Stahl at george.stahl@wsj.com
(END) Dow Jones Newswires
April 28, 2016 08:20 ET (12:20 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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