Abbott Laboratories ABT -0.11 % agreed to acquire St. Jude Medical Inc. STJ 2.94 % in a cash-and-stock deal valued at $ 25 billion that would create one of the leading makers of heart-related devices.
Under the deal, Abbott agreed to swap $ 46.75 in cash and 0.8708 shares for each St. Jude share. The offer values each St. Jude share at about $ 85, representing a 37% premium to the stock’s closing price Wednesday.
Shares of Abbott fell 7.4% to $ 40.60 in premarket trading, while St. Jude rose 25% to $ 77.70.
The companies said the deal merges St. Jude’s strong positions in heart-failure devices, heart catheters and defibrillators with Abbott’s strength in coronary intervention and heart-valve repair. When combined, the merged company will have annual cardiovascular sales of $ 8.7 billion.
The merger is occurring as heart disease becomes a bigger problem. According to the companies, more than 40% of adults in the U.S. are expected to have one or more forms of heart disease by 2040.
The boards from both companies have approved the transaction, which still requires shareholder and regulatory approvals. The companies expect the deal to close in the fourth quarter.
Abbott sees the deal adding to its adjusted earnings in the first full year after closing. On a per-share basis, Abbott estimates the buy increasing earnings by 21 cents in 2017 and 29 cents in 2018. The companies see sales and operational benefits of $ 500 million by 2020.
In 2015, Abbott’s sales rose 0.8% to $ 20.4 billion, and its earnings nearly doubled to $ 4.4 billion, which included a gain from the sale of discontinued operations. As of Wednesday, Abbott had a market vale of $ 64.6 billion.
St. Jude’s sales fell 1.4% to $ 5.54 billion in 2015, and its earnings declined 12% to $ 880 million. The company’s market value was $ 17.6 billion.
Abbott’s deal for St. Jude comes as the company is trying to complete its $ 5.8 billion purchase of Alere Inc., the health-care diagnostics company that is grappling with foreign corruption probes.
Abbott agreed in February to pay $ 56 per share to acquire Alere, a 51% premium to the company’s share price before the deal’s announcement. Since then, Alere has disclosed it has received a subpoena regarding a foreign corruption investigation over payments in Africa, Asia and Latin America. The company also has missed a deadline to file its 2015 annual report with regulators because it is analyzing its revenue recognition in Africa and China over the past three years.
Last week, Abbott Chief Executive Miles D. White declined to affirm his commitment to the deal. Thursday, though, Abbott discussed plans to issue $ 3 billion of stock “to rebalance its capital structure” and help finance the Alere and St. Jude deals.
Write to George Stahl at [email protected]