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Abbott to acquire St. Jude Medical for $25b.

There seems to be no end to the blockbuster acquisitions in the medical device industry. Last year, Medtronic gobbled up Covidien plc and Zimmer took Biomet under its wing. Now, Abbott Laboratories is grabbing headlines for its $25 billion purchase of St. Jude Medical Inc.

Announced in late April, the deal creates a premier medical device leader with top positions in high-growth cardiovascular markets, including atrial fibrillation, structural heart, and heart failure as well as a leading position in the high-growth neuromodulation market. Under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. The combined company will have a pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision, and neuromodulation patient care.

St. Jude Medical's strong positions in heart failure devices, atrial fibrillation, and cardiac rhythm management are expected to complement Abbott's positions in coronary intervention and transcatheter mitral repair. Together, the company will compete in nearly every area of the cardiovascular market and hold the top or No. 2 positions across cardiovascular device markets.

"Bringing together these two companies will create a premier medical device business and immediately advance Abbott's strategic and competitive position," said Miles D. White, chairman and CEO of Abbott. "The combined business will have a powerful pipeline ready to deliver next-generation medical technologies and offer improved efficiencies for healthcare systems around the world."

"The 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 T. Rousseau, St. Jude Medical president and CEO. "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 upside potential of the combined organization."

The acquisition of St. Jude Medical will advance Abbott's strategic and competitive positions:

* Aligned with healthcare and demographic trends: Cardiovascular medical devices are important tools to address the growing health and economic burden of cardiovascular disease (CVD). In the United States, more than 40 percent of adults are expected to have one or more forms of CVD by 2030. The combined business will have one of the broadest portfolios of devices and an industry-leading pipeline to help healthcare systems provide better care for patients while increasing efficiencies and reducing costs.

* Leadership positions in core businesses: With combined annual sales of approximately $8.7 billion, Abbott's cardiovascular business and St. Jude Medical will compete in nearly every area of the cardiovascular market, with an aggregate opportunity worth $30 billion.

* Strong positions in the world's largest and fastest-growing geographies: St. Jude Medical will strengthen Abbott's global scale, infrastructure, and capabilities.

* Well-managed diversity to deliver reliable, sustainable growth: St. Jude Medical further diversifies and enhances sources of future growth for Abbott. The combined pipelines are expected to bring numerous new medical device products to key markets this year, including:

** St. Jude Medical's EnSite Precision next-generation cardiac mapping system used to visualize and navigate catheters in the heart during ablation procedures; first-to-market Multipoint Pacing technology advances quadripolar technology and provides additional options for cardiac resynchronization therapy patients who are not responsive to other pacing options; Proclaim Elite recharge-free Spinal Cord Stimulation System and Prodigy Chronic Pain System, which are used for treating chronic pain and are MRI safe, upgradeable, and feature its proprietary Burst technology.

** Abbott's FreeStyle Libre, a sensor-based glucose monitoring system for people with diabetes that eliminates routine finger sticks; Tecnis Symfony, a first-in-kind continuous range of vision intraocular lens for the treatment of people with cataracts; and Absorb, the world's first bioresorbable coronary stent.

The acquisition of St. Jude Medical is expected to be accretive to Abbott's adjusted earnings per share in the first full year after closing and increasing thereafter, with approximately 21 cents of accretion in 2017 and 29 cents in 2018. The combination is anticipated to result in annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits.

St. Jude Medical's net debt of approximately $5.7 billion will be assumed or refinanced by Abbott. Abbott intends to fund the cash portion of this transaction with medium- and long-term debt. The transaction is expected to close in the fourth quarter of 2016.
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Title Annotation:Top of the News
Publication:Medical Product Outsourcing
Date:Jun 1, 2016
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