Yesterday, Abbott Labs (ABT) announced that it would acquire the pharmaceuticals business of Belgian company Solvay Group for €4.5 billion or approximately $6.6 billion in cash.
With this deal, Abbott will gain access to Solvay’s pharmaceutical portfolio, which includes products that focus on specialty markets like cardiovascular disease, neuroscience, men’s and women’s hormonal health and gastroenterology. Abbott will also gain full global rights to Solvay’s fenofibrate franchise. Abbott currently has U.S. rights to fenofibrate (TriCor and TriLipix), and pays royalties to Solvay.
The deal will also boost Abbott’s R&D spending capacity, which should lead to the speeding up of the company’s pipeline programs. As far as Solvay is concerned, the company intends to utilize the money raised from the sale towards the growth of its chemical and plastics division.
In our opinion, the Solvay deal will not only expand Abbott’s product portfolio, but it will also allow Abbott to expand its presence in the European market as well as emerging markets where Solvay has a strong presence. Importantly, this deal will give Abbott a chance to enter the attractive global vaccines market, which is currently dominated by names like GlaxoSmithKline (GSK), Merck (MRK), Novartis (NVS) and Sanofi-Aventis (SNY).
Abbott expects the acquisition to boost annual sales by more than $3 billion, with a major part of additional sales coming from ex-U.S. territories. Before considering one-time transaction-related items, the deal is expected to be accretive to ongoing earnings per share by 10 cents
in 2010 and by more than 20 cents by 2012. The deal will not impact results in 2009 as the transaction is scheduled to close in the first quarter of 2010 following customary closing conditions and regulatory approvals.
We currently have a Neutral rating on Abbott. The company has been on a buying spree of late. Earlier this year, Abbott completed its acquisition of Advanced Medical Optics. Besides this, the company also acquired eye care companies Visiogen and Evalve, Inc., which focus on the development of devices for minimally invasive repair of cardiac mitral valves.
With these deals, we believe Abbott is looking to diversify its product portfolio so that it can reduce its dependence on Humira, which contributed $4.5 billion to sales in 2008.
Read the full analyst report on “ABT”
Read the full analyst report on “GSK”
Read the full analyst report on “NVS”
Read the full analyst report on “SNY”
Read the full analyst report on “MRK”
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