M&A

Abbott to Acquire St. Jude Medical For $25B

The deal combines St. Jude's strong positions in heart-failure devices and catheters with Abbott's treatments for cardiovascular disease.
Katie Kuehner-HebertApril 28, 2016

Abbott Laboratories on Thursday said that it would buy St. Jude Medical in a $25 billion deal to garner more share in the high-growth cardiovascular and neuromodulation markets.

St. Jude Medical shareholders would receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. At an Abbott stock price of $43.93, this represents a total transaction equity value of $25 billion, the companies said.

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After the deal is completed, expected in the fourth quarter, “the combined business will have a powerful pipeline ready to deliver next-generation medical technologies and offer improved efficiencies for health care systems around the world,” chairman and chief executive Miles D. White said in a press release.

St. Jude Medical's global headquarters

St. Jude Medical’s global headquarters

However, analysts on the company’s media call were skeptical that the deal would pay off as promised, even though White told them it would add 21 cents per share to earnings, excluding special items, in 2017 and 29 cents in 2018, according to Reuters.

White said on CNBC that while St. Jude has had low-growth years, it has new products to introduce over the next few years.

Abbott is also trying to buy diagnostics company Alere for $5.8 billion, but investors worry the deal will fall through because the U.S. government is investigating that company over sales practices, according to Reuters.

“Abbott as serial acquirer has built up its medical device division,” Morningstar analyst Debbie Wang told Reuters. “Once they make those purchases, it does not seem like management is very good at producing meaningful innovation.”

Abbott said it would take on or refinance about $5.7 billion of St. Jude’s net debt. It sees $500 million in cost savings by 2020.

Photo: St. Jude Medical