In a story April 28 about an Abbott Laboratories plan to buy St. Jude Medical, The Associated Press reported erroneously the deal's value. Abbott Laboratories will spend $25 billion to buy St. Jude Medical, not $19.3 billion.
A corrected version of the story is below:
Abbott Labs to spend $25 billion to buy St. Jude Medical
Abbott Laboratories will spend $25 billion to buy St. Jude Medical Inc. in a cash-stock deal that aims to strengthen the medical device maker's share of the market for cardiovascular care
By TOM MURPHY and MATTHEW PERRONE
AP Business Writers
Abbott Laboratories will spend $25 billion to buy St. Jude Medical Inc. in a cash-stock deal that aims to strengthen the medical device maker's stake in cardiovascular care.
Shares of North Chicago, Illinois-based Abbott plunged, while St. Jude soared Thursday morning after the companies announced the deal.
The combined company will offer devices in nearly every area of cardiovascular care, competing directly with industry leaders Medtronic Inc. and Boston Scientific Corp. It noted that the acquisition will blend St. Jude's pacemaker and implantable defibrillator business with Abbott's focus on artery-opening stents and heart repair products.
Wells Fargo analyst Larry Biegelsen said the deal makes sense because "there is very little overlap" between the companies' offerings. The combined business will be better able to compete with larger companies in the device space, including Johnson & Johnson.
Abbott said St. Jude shareholders will receive $46.75 in cash and a portion of Abbott stock for each St. Jude share. The total consideration adds up to about $85 per share.
That represents a 37 percent premium to Wednesday's $61.95 closing price of St. Jude shares.
The deal value totals around $30.7 billion based on Abbott's recent stock price and assuming about $5.7 billion in St. Jude debt.
Abbott makes medical devices and generic drugs, but infant formula and nutritional beverages, which includes the Similac, Ensure and Pedialyte brands, make up the company's biggest business. In February, Abbott said it would spend $4.8 billion on Alere Inc. to expand its medical testing business.
St. Jude's expertise selling medical implants to hospitals should open new opportunities and help drive sales for Abbott's devices, according to Leerink Swann analyst Danielle Antalffy.
"Abbott's device business has been under-scaled, driving underperformance over the last few years," Antalffy states, in a note to investors.
Abbott said the boards of both companies have approved the deal for St. Paul, Minnesota-based St. Jude. The companies expect the deal will close in the fourth quarter, but the acquisition still must be reviewed by regulators and approved by St. Jude shareholders.