A heart-healthy deal

ABBOTT PARK, Ill. & ST. PAUL, Minn.—No moss is growing on Abbott, as just a quarter of the way through 2016, the company has already announced a second billion-dollar acquisition. On the heels of its planned $5.8-billion deal for Alere (read more about that here at "Taking point in point-of-care"), Abbott has now announced that it has signed a definitive agreement to acquire St. Jude Medical for roughly $85 per share ($46.75 in cash and 0.8708 shares), for a total transaction equity value of $25 billion. Both companies' boards of directors have approved the deal, which is subject to St. Jude Medical shareholder approval and customary closing conditions. The deal is expected to close in the fourth quarter of this year.

Abbott expects this combination will make the company a premier medical device leader with strong positions in the neuromodulation market and in several growing cardiovascular markets, including atrial fibrillation, structural heart and heart failure. St. Jude Medical has a strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management, which complements Abbott's own leading positions in coronary intervention and transcatheter mitral repair.

"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," Michael T. Rousseau, St. Jude Medical's president and CEO, said in a press release. "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. I'd like to thank our 18,000 employees whose hard work and commitment help us deliver leading medical technologies to patients around the world."

The combined company is expected to see annual sales of approximately $8.7 billion. Abbott's cardiovascular business and St. Jude Medical are expected to hold the first or second positions in large and high-growth cardiovascular device markets, with an aggregate market opportunity of $30 billion.

The acquisition is expected to be accretive to Abbott's adjusted earnings per share in the first full year after closing and increasing thereafter, to the tune of approximately 21 cents of accretion in 2017 and 29 cents in 2018. Abbott foresees annual pre-tax synergies of $500 million by 2020 in terms of both sales and operational benefits. The company plans to assume or refinance St. Jude Medical's net debt of approximately $5.7 billion.

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

Evercore is serving as Abbott's lead financial advisor for this transaction, with Wachtell, Lipton, Rosen & Katz serving as legal counsel. BofA Merrill Lynch will be providing financing in addition to serving as a financial advisor to Abbott. St. Jude Medical has brought on Guggenheim Securities as its financial advisor and Gibson, Dunn & Crutcher LLP as legal counsel.

SOURCE: Abbott press release