Abbott and St. Jude say the acquisition basically makes them a stronger force in in the market, which has seen an increasing demand for cardiovascular medical devices.
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With St. Jude, Abbott could compete better in an environment where hospitals prefer to deal with only two or three companies, White said.
According to the chief executive, the combined company will have a unique competitive advantage with the ability to negotiate better deals with medical providers and reduce overall health care costs for patients.
Under the terms of the deal, St. Jude shareholders will get $46.75 in cash and 0.8708 shares in Abbott common stock, which comes to about $85 per share.
The announcement sent St. Jude’s stock price soaring, closing the trading day up 25 percent. The merger deal has been worked out in such a way that Abbott will spend $19.3 billion and assume about $5.7 million in St. Jude debt.
Abbott, an industry leader in heart stents, has been bulking up its generic-drugs business in emerging markets and nutrition products sold directly to consumers in recent years.
The companies emphasized the strength of their combined position in cardiovascular medical devices, with total sales of about $8.7 billion in what they have estimated as a $30 billion market.
St. Jude Medical Inc., one of Minnesota’s most prominent companies in the medical device industry, is being bought by an IL company in a deal worth billions of dollars.
While the acquisition deal is expected to close sometime in the fourth quarter, it still needs shareholder approval and to jump over regulatory hurdles.
Abbott said in the statement it had financing for both St Jude Medical and for its planned acquisition of Alere Inc for US$5.8bil, sending Alere shares higher in early trading. Abbott CEO Miles White last week declined to respond directly to a question on the Alere agreement, fueling speculation the deal might not close. The total number of outstanding shares held by the company are 1.47 billion with the total market capitalization of $59.48 billion. With St. Jude, it’s gaining complementary products like pacemakers and defibrillators. The stock is well liked by 21 analysts covering the shares, as is evidenced by the average broker recommendation (ABR) of 1.88.
When asked about this directly by another analyst during the investor conference call, White said, “I don’t think you should view this as a two-step process”.
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St. Jude Medical is a leading global medical device manufacturer and is dedicated to transforming the treatment of some of the world’s most expensive epidemic diseases. Alere subsequently said it would delay filing its 10-K report with USA securities regulators and disclosed in March that it that it had been subpoenaed by the Justice Department over sales practices and dealings in Africa, Asia and Latin America.
