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$4.325 Billion Deal Settled for J&J’s Acquisition of Abbott’s Eye-Surgery Equipment Unit


09/17/2016


$4.325 Billion Deal Settled for J&J’s Acquisition of Abbott’s Eye-Surgery Equipment Unit
As the health-care giants remake their lineups of medical devices, Abbott Laboratories agreed to sell its eye-surgery equipment business to Johnson &  Johnson for $4.325 billion. This was disclosed y the two companies on Friday.
 
According to the Johnson & Johnson, with an $8 billion global market that is growing about 5% a year, the company would be propelled to the No. 2 business company in the cataract surgeries segment of the all-cash deal which has previously been reported in the media, goes through smoothly.
 
For a value of $2.8 billion which included debt, the eye business which was then known as Advanced Medical Optics, was bought by Abbott in 2009. The Abbott Park, Ill., company has been doing deals in faster-growing device segments and this perhaps the reason that, amid sluggish sales, the company is selling the business, now named Abbott Medical Optics.
 
“We’ve been actively and strategically shaping our portfolio,” focusing more on heart devices and expanding diagnostics,” Chief Executive Miles D. White said in prepared remarks.
 
A roughly $25 billion deal pending agreement to buy Jude Medical Inc. and its portfolio of heart valves, pacemakers and other cardiovascular devices is the biggest of Abbott’s recent deals. Abbott was forced to complete the acquisition of health-testing company Alere Inc. for about $5 billion,, after the former decided to shy away from an agreement to buy Alere after the company faced a foreign corruption investigation.
 
Medical device companies are facing intensifying competition and pricing pressure from networks of hospitals that have themselves been consolidating and hence there has been a wave of mergers among medical-device companies.
 
In addition to contact lenses, equipment used in cataract and LASIK vision-correction surgeries are manufactured by Abbott’s medical-optics business. Down 6.9%, largely because of a strong dollar, last year it notched $1.1 billion in sales. Sales have been picking up this year.
 
Abbott’s earnings target for 2017 isn’t seen changing by the deal which is expected to close by April.
 
As part of efforts to accelerate growth in the unit, Johnson & Johnson, based in New Brunswick, N.J., also has been acquiring medtech assets. For roughly $20 billion, it bought Synthesis Inc., a maker of devices used to treat fractures and traumatic injuries in 2012.
 
Ashley McEvoy, the Johnson & Johnson  executive responsible for the company’s vision-care companies said that the company would be helped in its diversificait0on efforts into the surgical and increase sales in emerging markets by AMO, and its cataract-replacement lenses especially, which will fit naturally with Johnson & Johnson’s eye-care unit.
 
“We’ve always been interested in the broader eye-health segment,” Ms. McEvoy said in an interview.
  
As a part of a $7 billion segment of the $68 billion global eye-health market, the business complements Johnson & Johnson’s portfolio of contact lenses and solutions. This deal would give an opportunity to investigate the common motivations for health-care mergers to the salespeople in discussions with doctors and would give Johnson & Johnson more products to pump through its distribution network.
 
Johnson & Johnson  ees the deal immediately adding to its adjusted earnings after the close.
 
While Abbott had $20.4 billion in total revenue last year, Johnson & Johnson notched $25.1 billion in medical-device sales.
 
(Source:www.wsj.com)