Abbott Labs to buy St. Jude Medical for $25bn

Apr 28, 2016, 11:42 AM EDT
(Source: perry.interiors/flickr)
(Source: perry.interiors/flickr)

Abbott Labs will buy St. Jude Medical for $25 billion to expand its heart device business.

Bloomberg reports:

Abbott Laboratories agreed to buy heart-device maker St. Jude Medical Inc. for $25 billion, its biggest ever acquisition as the industry consolidates to gain bargaining power with hospitals. St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing a total of approximately $85 per share, according to a statement Thursday. Medical-devices makers are merging to get access to new technology as hospitals push for lower prices. After shying away from mega deals since splitting its brand name pharmaceutical business to AbbVie Inc. in 2013, Abbott is now joining Medtronic Plc and Johnson & Johnson, which both made their largest purchases in recent years. Abbott Chief Executive Officer Miles White talked often about his desire for bigger purchases while pursuing smaller deals, although the recent rounds of M&A lifted the prices of potential targets, leaving fewer options.

Reuters notes:

Analysts questioned the cost of the deal versus its financial benefits, and how it would affect Abbott's purchase of diagnostics company Alere Inc (ALR.N), which the U.S. government is investigating for its sales practices. Abbott Chief Executive Officer Miles White defended the St. Jude deal, saying it would add to earnings per share in the first full year after it closes. He also said financing plans contemplate both the Alere and St. Jude acquisitions.

The Wall Street Journal writes:

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 company said St. Jude's devices for heart failure, blockages and abnormal heart rhythm complement its range of heart products. With St. Jude, Abbott could compete better in an environment where hospitals prefer to deal with only two or three companies, White said.