LONDON, UK / ACCESSWIRE / January 3, 2017 / Active Wall St. blog coverage looks at the headline from global healthcare major Abbott Laboratories (ABT) and medical device company St. Jude Medical, Inc. (STJ) as both companies announced on December 30, 2016, that their merger is set to close on January 04, 2017. Both companies having cleared all the hurdles from anti-trust regulators, including US and China, are finally set to unite. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Abbott had announced the merger with St. Jude in April 2016 in a cash and stock deal valued at $25 billion. Abbott had offered $46.75 in cash and 0.8708 shares of Abbott's common stock for each of St. Jude's share. The merged company is expected to have an annual cardiovascular sale of $8.7 billion. The merger will lead to $500 million in annual cost synergies.
With the acquisition of St. Jude's, Abbott expected to strengthen its medical devices business, especially in the cardiovascular disease area. The merger would place Abbott on a firm footing in dealing with competition from rival medical device manufacturers Medtronic PLC and Boston Scientific Corp. In October 2016, St. Jude's shareholders had unanimously approved the merger with Abbott.
The Hurdles to the Merger
The US Federal Trade Commission (FTC) had complained that the merger would corner more than 70% of the market for vascular closure devices and create a kind of monopoly and would harm the competition. The vascular closure devices are used to close holes in arteries from the insertion of catheters and steerable sheaths guide catheters for treating heart arrhythmias.
To address the competition concerns and in order to facilitate the merger, FTC had put forth certain conditions. FTC had suggested that Abbott and St. Jude divest two of their businesses to Tokyo-based medical device maker Terumo Corporation. Based on FTC's order, Abbott and St. Jude in October 2016 announced that they have signed an in-principle agreement with Terumo to sell St. Jude Medical's vascular closure products and Abbott's Steerable Sheath for a purchase price of $1.2 billion in cash. Terumo has been selling medical devices and related products, other than the vascular closure devices or steerable sheaths, in the US for more than 30 years. FTC has also ordered Abbott and St. Jude to help Terumo in establishing manufacturing facilities for these two devices.
Apart from this FTC has asked for Abbott's intention with regards to acquisition of Advanced Cardiac Therapeutics (ACT)'s lesion-assessing ablation catheter business. The reason being, St. Jude and one more company are the only manufacturers of lesion-assessing ablation catheters. Abbott and ACT have a strategic partnership since 2014 and the Abbott – St. Jude merger would further reduce the competition in this business as well.
Merger raises concern from across globe from Anti-trust regulators
Given the global presence and reach of both companies, the merger raised competition concerns from other anti-trust regulators, including Brazil, Canada, China, the European Union, Israel, Korea, and South Africa. The regulating agencies and their staff worked in conjunction with each other to address the anti-trust concerns and suggest a workable remedy to help in closing the merger between Abbott – St. Jude. In November 2016, the European Commission granted conditional approval for the merger on the same lines as that of FTC. On December 16, 2016, the Competition Committee of India also approved the Abbott – St. Jude merger.
The approval from the Chinese regulators followed on December 30, 2016, with China's Ministry of Commerce giving its conditional go-ahead. The Chinese regulator's review of the merger found that the Terumo deal would fix their anti-trust concerns. The Chinese regulators have given the companies a twenty-day time frame, from the date of the closure of the deal, to comply with its order. Since the companies have already signed a deal with Terumo in October 2016, the Abbott – St. Jude merger is set for a smooth sailing.
The current merger is especially important for both Abbott and St. Jude given the fiasco of Abbott's $5.8 billion acquisition of diagnostic test maker Alere Inc., and St. Jude which is facing problems with regards to the alleged defects in its cardiac pacemakers.
At the close of trading session on Friday, December 30, 2016, Abbott Labs' stock price slightly rose by 0.26% to end the day at $38.41. A total volume of 10.45 million shares were exchanged during the session, which was above the 3-month average volume of 8.59 million shares. The stock currently has a market cap of $56.40 billion. The Company's shares are trading at a PE ratio of 57.76 and have a dividend yield of 2.76%.
St. Jude Medical's stock marginally climbed 0.45% from its previous closing price of $79.83, ending last Friday's trading session at $80.19. A total volume of 3.89 million shares were traded at the end of the day, which was higher than the 3-month average volume of 2.39 million shares. In the last twelve months, shares of the Company have surged 31.61%. Moreover, the stock soared 31.61% since the start of the year. The Company's shares are trading at a PE ratio of 35.12 and have a dividend yield of 1.55%. The stock has a market capital of $22.81 billion.
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