Abbott, a global healthcare company, and St. Jude Medical, Inc., a leading global medical device manufacturer, announced a definitive agreement for Abbott to acquire St. Jude Medical, creating a premier medical device leader with top positions in high-growth cardiovascular markets, including atrial fibrillation, structural heart and heart failure as well as a leading position in the high-growth neuromodulation market.
Under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. At an Abbott stock price of $43.93(2), this represents a total transaction equity value of $25 billion. The combined company will have an industry-leading pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care.
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. Together, the company will compete in nearly every area of the cardiovascular market and hold the number 1 or 2 positions across large and high-growth cardiovascular device markets. This best-in-class combined portfolio will have the depth, breadth and innovation to help patients restore their health, reduce costs for payors and deliver greater value to customers.
"Bringing together these two great companies will create a premier medical device business and immediately advance Abbott's strategic and competitive position," said Miles D. White, chairman and chief executive officer, Abbott. "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."
"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," said Michael T. Rousseau, St. Jude Medical president and chief executive officer. "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 organisation. 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 acquisition of St. Jude Medical will advance Abbott's strategic and competitive positions:
Cardiovascular medical devices are important tools to address the growing health and economic burden of cardiovascular disease (CVD). In the US alone, more than 40 per cent of adults are expected to have one or more forms of CVD by 2030. The combined business will have one of the broadest portfolios of devices and an industry-leading pipeline to help healthcare systems provide better care for patients while increasing efficiencies and reducing costs.
With combined annual sales of approximately $8.7 billion, Abbott's cardiovascular business and St. Jude Medical will hold the number 1 or 2 positions across large and high-growth cardiovascular device markets and will compete in nearly every area of the market – with an aggregate market opportunity of $30 billion.
St. Jude Medical further diversifies and enhances sources of future growth for Abbott – the combined pipelines are expected to bring numerous new medical device products to key markets this year, including:
St. Jude Medical's EnSite Precision next-generation cardiac mapping system used to visualise and navigate catheters in the heart during ablation procedures; first-to-market MultiPoint Pacing technology advances quadripolar technology and provides additional options for cardiac resynchronization therapy patients who are not responsive to other pacing options; Proclaim Elite recharge-free Spinal Cord Stimulation System and Prodigy Chronic Pain System, which are used for treating chronic pain and are MRI safe, upgradeable, and feature its proprietary Burst technology.
Abbott's portfolio includes FreeStyle Libre, a sensor-based glucose monitoring system for people with diabetes that eliminates routine finger sticks; Tecnis Symfony, a first-in-kind continuous range of vision intraocular lens for the treatment of people with cataracts; and Absorb, the world's first bioresorbable coronary stent.
St. Jude Medical has strong and leading positions around the world, strengthening Abbott's global scale, infrastructure and capabilities.
The acquisition of St. Jude Medical is expected to be accretive to Abbott's adjusted earnings per share in the first full year after closing and increasing thereafter, with approximately 21 cents of accretion in 2017 and 29 cents in 2018. The combination is anticipated to result in annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits. One-time deal-related costs and integration costs will be provided at a future date.
St. Jude Medical's net debt of approximately $5.7 billion will be assumed or refinanced by Abbott. Abbott intends to fund the cash portion of this transaction with medium- and long-term debt.
The transaction, which has been approved by the boards of directors of St. Jude Medical and Abbott, is subject to the approval of St. Jude Medical shareholders and the satisfaction of customary closing conditions, including specified regulatory approvals. The transaction is expected to close in the fourth quarter of 2016.
Separately, Abbott expects to issue $3 billion of common stock in the secondary market to rebalance its capital structure, with timing to be determined.
Financing for the St. Jude Medical transaction and the previously announced Alere Inc. acquisition contemplates financing capacity to close both transactions.
The separate issuance of equity to the market is not a condition to the completion of either the St. Jude Medical transaction or the Alere transaction. Abbott has obtained a commitment letter from BofA Merrill Lynch for the full cash portion of the consideration for both transactions.
Evercore is serving as the lead financial advisor for Abbott with Wachtell, Lipton, Rosen & Katz serving as legal counsel. BofA Merrill Lynch will be providing financing and also is serving as a financial advisor to Abbott. Guggenheim Securities is acting as financial advisor and Gibson, Dunn & Crutcher LLP is serving as legal counsel to St. Jude Medical.