Abbott agrees to acquire St. Jude Medical in $25 billion deal

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Abbott Laboratories has agreed to acquire St. Jude Medical in a blockbuster cash and stock transaction valued at approximately $25 billion.

The companies  said in a news release that, combined, they would be able to compete in every area of the cardiovascular market as their portfolios complement each other. St. Jude Medical is a leader in heart failure devices, atrial fibrillation and cardiac rhythm management, while Abbott is a leader in coronary intervention and transcatheter mitral repair.

In premarket trading, St. Jude Medical’s  shares were up nearly 25 percent, while Abbott’s  shares were down nearly 9 percent.

St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock.

In August 2015, Abbott  denied a Financial Times report that it was prepared to bid $25 billion to acquire St. Jude Medical.

Since 2008, the companies have  had an alliance under which they jointly sell U.S. hospitals a portfolio of products in interventional cardiology, cardiac rhythm management, electrophysiology and intravascular imaging and diagnostic technologies.

The boards of directors of St. Jude Medical and Abbott have approved the deal. St. Jude Medical shareholders now must approve the transaction, which is also subject to customary closing conditions, including regulatory approvals.

The companies expect the deal to close in the fourth quarter of 2016. St. Jude Medical announced it had cancelled its annual shareholder meeting on May 4 due to the merger agreement. It expects to reschedule the meeting for a later date.

The combined company will have annual sales of approximately $8.7 billion, which Abbott and St. Jude Medical believe will increase as their cardiovascular medical devices become more necessary. They cited data that shows 40 percent of adults are expected to have cardiovascular disease by 2030.

The deal is the latest major acquisition for Abbott in recent months. On Feb. 1, Abbott  agreed to acquire Alere for $5.8 billion to expand its global diagnostics presence. A day later, Abbott  agreed to acquire Kalila Medical, a privately held company that develops medical devices to treat atrial fibrillation and other heart rhythm disorders. The terms of that deal were not disclosed.

Abbott said the St. Jude Medical deal would be accretive to Abbott’s adjusted earnings per share in the first full year after closing. It expects its earnings to increase 21 cents per share in 2017 and 29 cents per share in 2018. Abbott also anticipates the acquisition will lead to annual pre-tax synergies of $500 million by 2020.

“Bringing together these two great companies will create a premier medical device business and immediately advance Abbott's strategic and competitive position,” Abbott CEO Miles D. White said in a news release. “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.”