Abbott Denies Reported $25B Takeover Of St. Jude Medical
By Jof Enriquez,
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Abbott Laboratories has denied a report that it is preparing to purchase medical device maker St. Jude Medical. However, analysts say that, consistent with its top executive's earlier pronouncements, Abbott still may be looking to acquire companies smaller than St. Jude.
On Thursday, Financial Times reported that people with knowledge of Abbott's thinking said the company had been working with advisers JPMorgan Chase & Co. and Citigroup Inc. for several weeks on a cash and stock offer valued at about $25 billion. FT has since updated its report to reflect that an Abbott spokesperson denied preparing a bid specifically for St. Jude.
"I can tell you that we are not pursuing an offer for St. Jude," Abbott spokesman Scott Stoffel told Reuters, who cites one other source privy to Abbott's plans who believes a deal was not in the works.
St. Jude Medical has not responded to requests for comment from either news outlet.
FT notes that Abbott and St. Jude have an existing collaboration in selling cardiovascular devices, and a possible merger of the two companies would give the combined company greater leverage in negotiating with healthcare providers who prefer value-based products.
Abbott CEO Miles White, said last month that he was interested in acquiring targets, including device companies, Bloomberg reports. However, Abbott has to exercise diligence, given that consolidation in the healthcare industry has jacked up prices of potential targets.
“While valuations are high, I think there’s a fairly robust set of opportunities that fit several of our businesses quite nicely and our strategies and intentions quite nicely,” White said on last month's conference call to discuss earnings, according to Bloomberg.
“So I’m not sitting here on a pile of cash thinking there’s nothing out there of interest that fits us. Quite the contrary, I think there’s quite a lot out there that fits us well,” he told analysts, according to the article. Bloomberg estimates that Abbott has about $11.2 billion in cash, equivalents and short-term items that it could use to fund future acquisitions.
St. Jude Medical, a leading manufacturer of pacemakers and defibrillators, is considered a viable target for Abbott, which has worked to strengthen its medical device portfolio in recent years through a series of smaller acquisitions.
In an article in the Chicago Tribune announcing the acquisition of heart rhythm device company Topera last year, John Capek, executive VP of medical devices for Abbott, said a growing aging population makes the heart rhythm disorders field of medicine an attractive opportunity for the company.
St. Jude, however, is breaking into new markets beyond heart rhythm devices. Last month, it announced a deal to acquire Thoratec Corporation, a maker of left ventricular assist devices (LVADs), for $3.4 billion.
According to Reuters, St. Jude had a market value of about $19.5 billion, as of last Wednesday's market closing. That price may be too high for Abbott's liking, according to one analyst. RBC Capital Markets analyst Glenn Novarro told Reuters last month that a deal worth around $5 billion for a device maker was more realistic.