Abbott's $25 Billion Bid for St. Jude Medical Raises Questions About Pending Alere Deal
April 28, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Abbott Park, Ill.-based Abbott announced today that it is acquiring St. Paul, Minn.-based St. Jude Medical for about $25 billion.
St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, which makes a total consideration of about $85 per share. St. Jude has about $5.7 billion in debt, which Abbott will either acquire or refinance.
Abbott employs about 74,000 people. St. Jude employs about 18,000 people worldwide. The combination of the two companies will create a dominant company in cardiovascular medical devices, with potential $8.7 billion of total sales in a $30 billion market.
A benefit of the merger will be gaining access to new technologies in the face of hospitals pushing for lower prices. Abbott has strengths in heart stents, and has been bolstering its generic drugs business in emerging markets, as well as direct-to-consumer nutrition products. St. Jude is a leader in pacemakers and defibrillators.
According to Jonathan Palmer, an analyst with Bloomberg Intelligence, there’s a gap in the medical device business in the cardiovascular area, and St. Jude fits it perfectly.
“The synergies between the two companies are real and overall the fit between the device portfolios is a good one,” said Michael Weinstein, an analyst with JPMorgan Chase & Co. in New York, in a note to investors. “Abbott will look like a very different company going forward, less of an emerging market nutritionals play and more of a diversified device, diagnostics, nutritionals and branded generics company.”
On Feb. 1, Abbott announced it was acquiring Waltham, Mass.-based Alere (ALR) for about $5.8 billion.
“The combination of Alere and Abbott will create the world’s premier point of care testing business and significantly strengthen and grow Abbott’s diagnostics presence,” said Miles White, Abbott’s chairman and chief executive officer, in a statement at the time. “We want to offer our customers the best and broadest diagnostics solutions. Alere helps us do that.”
But Bloomberg points out that this St. Jude Medical deal raises some questions about the Alere deal. “Abbott said in the statement it has financing for both St. Jude Medical and Alere . That initially sent Alere shares higher in early trading, but the stock pared gains after Abbott Chief Executive Officer Miles White said on a conference call his company has financing, ‘broadly,’ for Alere, declining to comment further. Last week, White had declined to reiterate his commitment to Alere, which hasn’t yet filed its 10-K report with U.S. regulators and has been subpoenaed by the Justice Department.”
Abbott is currently trading for $41.26, slightly down from yesterday’s $43.83.
St. Jude Medical is currently trading for $79.39, up from $60.18 on April 26.
Alere is currently trading at $43.39, down from $49.47 on April 19.
“Today’s announcement is an exciting next chapter for St. Jude Medical, bringing together two industry leaders with a shared passion for innovation, culture and patients,” said Michael Rousseau, St. Jude Medical’s president and chief executive officer, in a statement. “Our combined scale will expand the global reach, competitiveness and impact of our medical device innovation for physicians and hospitals. This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization.”