Abbott Boosts Cardio Device Business With $25 Billion St. Jude Buy
Two giants in cardiac devices agreed to merge Thursday, as Abbott Laboratories ( ABT ) announced an agreement to acquire St. Jude Medical ( STJ ) in a deal worth $25 billion. Abbott agreed to pay $46.75 plus 0.8708 Abbott share for every St. Jude share. Based on Abbott’s five-day average share price, the deal valued St. Jude shares at $85 apiece. St. Jude stock was up more than 25% in morning trading on the stock market today , near 78, while Abbott stock was down more than 7%, below 41. Abbott said that the deal will add 21 cents to its EPS next year and 28 cents the following year. It expects to save $500 million in costs from the combination by 2020. Abbott will also assume or refinance St. Jude’s $5.7 billion in debt. The move will greatly enlarge Abbott’s cardiovascular device business, which now represents 19% of its revenue. “St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair,” said Abbott’s press release. “Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets.” Leerink analyst Danielle Antalffy agreed. St. Jude’s flat-to-negative sales growth over the last few years picked up to 8% in Q1, and she wrote in a research note that it’s set up to continue, while Abbott looked to be growing only in the low single digits. Antalffy also wrote that a competing bid is unlikely. “The most logical buyer beyond Abbott in our view would be Johnson & Johnson ( JNJ ),” Antalffy wrote. “In our meetings with J&J in mid-2015, management emphasized that the company is not interested in what they deemed ‘value’ markets within MedTech, specifically calling out cardiac rhythm management (nearly 30% of St. Jude’s total sales) and drug-eluting stents.” The deal announcement came on a busy day for M&A in medical field. Biotech Medivation ( MDVN ) confirmed that it had received an unsolicited $9.3 billion bid from big pharma Sanofi ( SNY ), while AbbVie ( ABBV ), which used to be Abbott’s biopharma division before it was spun out, agreed to buy another cancer-focused biotech, Stemcentrx, for $5.8 billion.