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Abbott Closes St. Jude Medical Deal Wednesday

- By Alberto Abaterusso

Abbott Labs (ABT) communicated through the PRNewswire on Dec. 30 that the closure of the purchase of St. Jude Medical (STJ) for $25 billion is expected on Wednesday.

Due to antitrust rules the Federal Trade Commission and the Chinese Commerce Ministry required Abbott to sell off two cardiovascular devices, St. Jude Medical's Angio-Seal and Femoseal, vascular closure products and Abbott's Vado Steerable Sheath, a heart catheter.


Last October the two U.S. companies agreed to sell two cardiovascular devices to Terumo Corp. (TSE:4543) for approximately $1.12 billion.

The Abbott Labs-St. Jude Medical business combination will make available to health care operators a larger portfolio of innovative devices and therapies for better patient care.

Becoming a leader in the cardiovascular market, the new business entity will also favorably affect shareholders creating "significant and sustainable value," which is the company's strategy "for long-term success," Miles D. White, Abbott's chairman and CEO, said.

Annually the new entity will sell cardiovascular and neuromodulation products for $8.7 billion.

Abbott Labs says that "the acquisition of St. Jude Medical is expected to be accretive to Abbott's adjusted earnings per share in the first full year and increasing thereafter (21 cents of accretion in 2017 and an estimated 29 cents in 2018)" and "to result in annual pretax synergies of $500 million by 2020."

As of today, analysts forecast that Abbott Labs will generate EPS of $2.21 on average in 2016, a 2.8% increase on a year-over-year basis and EPS of $2.42 on average in 2017, a 9.5% increase on a year-over-year basis:

Source: Yahoo Finance

Concerning revenue, analysts expect a 2.50% increase in 2016 from $20.41 billion to $20.92 billion and a 4.80% increase in 2017 from $20.92 billion to $21.91 billion.

Source: Yahoo Finance

Abbott closed at $38.41 per share Dec. 30, up 10 cents, or 0.26%, from the previous trading day, with 10,445,631 shares traded on the New York Stock Exchange (NYSE) versus an average volume of 7.12 million over the last 10 trading days and an average volume of 8.7 million shares over the last three months.

The number of shares available for trading is 1.47 billion. The price-earnings (P/E) ratio (TTM) is 25.48, the EPS (TTM) is $1.51 per share, and the dividend yield is 2.76%.

As of today, analysts recommend buying shares of Abbott, and the average target price is $46.85 per share.

During the third quarter, First Eagle Investment (Trades, Portfolio), George Soros (Trades, Portfolio) and Richard Pzena (Trades, Portfolio) reduced their positions in Abbott Labs by 57.24%, 21.26% and 5.81% while Joel Greenblatt (Trades, Portfolio) sold out his position.

Ken Fisher (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) increased their positions by 0.39% and 0.07%.

Abbott is a member of the Standard & Poor's 500 Dividend Aristocrats Index.

St. Jude Medical closed at $80.19 per share Dec. 30, up 36 cents or plus 0.45%, with a volume of 3,893,045 shares traded on the NYSE versus an average volume of 2.31 million traded over the last 10 trading days and an average volume of 2.42 million shares over the last three months.

During the third quarter, John Rogers (Trades, Portfolio), David Dreman (Trades, Portfolio), Greenblatt and Gabelli reduced their positions in St. Jude Medical by 90.15%, 99.70%, 86.91% and 10.08%.

Leucadia National (Trades, Portfolio) and John Paulson (Trades, Portfolio) increased their positions by 166.0% and 107.69%.

Soros, Fisher and Keeley Asset Management Corp (Trades, Portfolio) sold out their positions while First Eagle Investment opened a position in St. Jude Medical and bought 545,389 shares of the company.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.