Abbott’s $30.7B Deal Boosts Medical Device M&A

Medical device deals are back in fashion. In the first four months of 2016, 41 deals were announced in this sector, compared with just 30 for the comparable time period in 2015. Spending on deals in this sector has already hit $42.7 billion, compared with $5.7 billion in the first four months of 2015. The largest by far this year is Abbott‘s (NYSE: ABT) announcement on April 28 that it would spend $30.7 billion to acquire Minneapolis-based St. Jude Medical, Inc. (NYSE: SJM).

St. Jude shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share, and a transaction equity value of $25 billion. Add in the approximately $5.7 billion of net debt that Abbott will assume or refinance, and the price rises to $30.7 billion.

St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management fit well with Abbott’s leading positions in coronary intervention and transcatheter mitral repair. The combined portfolio covers nearly every area of the cardiovascular market, and puts the combined company in the first or second position across large and high-growth cardiovascular device markets.

For those keeping score, Abbott made a $5.8 billion deal for Alere Inc. (NYSE: ALR) in February. Alere provides point-of-care diagnostics and services focused on the areas of infectious disease, cardiometabolic disease, and toxicology in the United States and internationally.

To finance it all, Abbott expects to issue $3 billion of common stock in the secondary market to rebalance its capital structure, with the timing to be determined. This issuance is not a condition to the completion of either deal, as Abbott has obtained a commitment letter from BofA Merrill Lynch for the full cash portion of the consideration for both transactions.

 

 

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