Abbott, a global healthcare company, announced that it will sell its developed markets branded generics pharmaceuticals business to Mylan for equity ownership of a newly formed entity that will combine Mylan's existing business and Abbott's developed markets pharmaceuticals business, and will be a publicly traded company. This represents a value of approximately $5.3 billion based on Mylan's closing stock price on Friday. The developed markets portion of this business generated approximately $2 billion in sales in 2013.

Abbott will retain its branded generics pharmaceuticals business and products in emerging markets. Abbott also retains its other businesses and products in developed markets.   

"This transaction provides Abbott with additional strategic flexibility as we continue to actively manage and shape our portfolio, reflecting our commitment to long-term, durable growth," said Miles D White, chairman and chief executive officer, Abbott. "Our branded generics pharmaceuticals business will focus on emerging markets, where demographic changes and increasing access to healthcare are expected to drive sustainable growth."

Following the closing of the transaction, Abbott's branded generics pharmaceuticals business will focus in emerging geographies where demographics and growing healthcare systems are combining to create an increased rate of patient access to healthcare and where the majority of healthcare products are paid for by the consumer. The branded generics business that will remain with Abbott generated 2013 sales of $2.9 billion and is expected to have a sales growth rate in the upper-single to double digits.    

Under the terms of the agreement, Abbott will sell its developed markets branded generics pharmaceuticals business to Mylan for 105 million shares or approximately 21 per cent, on a fully diluted basis, of a newly formed entity that will combine Mylan's existing business and Abbott's developed markets pharmaceuticals business, and will be a publicly traded company.

The business to be sold operates in Europe, Japan, Canada, Australia and New Zealand and includes approximately 3,800 employees. It includes a broad portfolio of medicines, as well as manufacturing facilities in France and Japan. Abbott will retain its product portfolio and manufacturing facilities in other geographies as well as its manufacturing facilities in the Netherlands, Germany and Canada.

Following the transaction, which is expected to close in the first quarter of 2015, Abbott expects that its sales growth rate will be 100 basis points higher, and the growth rate of its ongoing net income will be in excess of 200 basis points higher. The ongoing net income associated with Abbott's developed markets pharmaceuticals business is expected to be approximately $0.22 per share in 2015. Accordingly, Abbott's ongoing earnings per share from continuing operations is expected to be lower following the close of this transaction by this amount.

Abbott does not expect to be a long-term shareholder in Mylan and plans ultimately to redeploy the net proceeds from this transaction to opportunities that would be accretive to earnings over time.

In May, Abbott announced the acquisition of the Latin American pharmaceutical company CFR Pharmaceuticals, which is expected to be approximately $0.07 accretive to Abbott's ongoing earnings per share in 2015.

Abbott expects to report its developed markets branded generics pharmaceuticals business as Discontinued Operations beginning in the third quarter 2014.

Morgan Stanley advised Abbott on the transaction.