EU Regulators to Rule on Abbott-St. Jude Deal Next Month

European antitrust regulators will decide by Nov. 9 whether to clear Abbott Laboratories’ $25-billion bid for St. Jude Medical Inc., aimed at helping it better compete with bigger rivals.
 
Abbott sought the European Commission’s approval for the deal on Oct. 3, according to a filing on the European Union competition enforcer’s website on Tuesday.
 
The Commission can either clear the deal with or without concessions or it can open a full-scale investigation if it has serious concerns. The majority of pharmaceutical mergers get the green light with or without conditions in the EU’s preliminary review.
 
The proposed merger would create a company with top positions in high-growth cardiovascular markets, including atrial fibrillation, structural heart, heart failure, and neuromodulation. Under the agreement, St. Jude Medical shareholders are slated to receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. At an Abbott stock price of $43.932, this represents a total transaction equity value of $25 billion. The combined company is expected to have a pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care.
 
St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s positions in coronary intervention and transcatheter mitral repair. Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets, according to executives at both organizations.
 
“Bringing together these two great companies will create a premier medical device business and immediately advance Abbott’s strategic and competitive position,” Miles D. White, chairman and Abbott CEO, said when the deal was announced in late April. “The combined business will have a powerful pipeline ready to deliver next-generation medical technologies and offer improved efficiencies for health care systems around the world.”
 
“The announcement is an exciting next chapter for St. Jude Medical, bringing together two industry leaders with a shared passion for innovation, culture and patients,” said Michael T. Rousseau, St. Jude Medical president and CEO said of the proposed merger. “Our combined scale will expand the global reach, competitiveness and impact of our medical device innovation for physicians and hospitals. This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization.”

The acquisition of St. Jude Medical is expected to be accretive to Abbott’s adjusted earnings per share in the first full year after closing and increasing thereafter, with approximately 21 cents of accretion in 2017 and 29 cents in 2018.1 The combination is anticipated to result in annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits.

St. Jude Medical’s net debt of approximately $5.7 billion will be assumed or refinanced by Abbott. Abbott intends to fund the cash portion of the transaction with medium- and long-term debt. The acquisition is expected to close in the fourth quarter of 2016.