On Wednesday, Abbott announced that it has closed its $25 billion acquisition of St. Jude Medical, and on the whole ever since the announcement was made analysts have cheered the deal.
After all, there isn’t much product overlap between the Abbott Park, Illinois, company and the St. Paul, Minnesota, device maker. However, if history repeats itself, the shiny new entity may not actually drive much value for shareholders, which is a major goal of public companies.
But first the take from an analyst:
“Now with [St. Jude Medical] added to the portfolio, not only does this accelerate [Abbott’s] growth profile within devices toward that mid-single-digit range, but we believe it also positions ABT to drive even more/faster growth via sales synergies now that the company can more effectively compete within hospitals with a broader product offering,” wrote Danielle Antalffy, an analyst with healthcare investment bank Leerink Partners, in a research note Thursday.
Yet Antalffy also added, “But we remain on the sidelines pending more clarity on progress of the STJ integration.”
Abbott CEO Miles White has no lack of confidence on this matter.
“Abbott has a strong track record of successfully integrating dozens of businesses on a global scale and accelerating growth,” White said in the news release announcing the official close of the transaction. “The addition of St. Jude Medical strengthens our global medical device leadership while offering innovative products to address more areas of care, in more physicians’ offices and hospitals around the world.”
If Abbott was buying Alere as well — which was the original plan before the medtech company has seemingly balked and wants out— this would have been two big integrations. And all that as St. Jude Medical was also digesting its own purchase, Thoratec completed in October 2015. The Minnesota device maker bought the cardiac assist device maker for $3.3 billion.
As the wave of consolidation and integration continue unabated in the medtech world, perhaps it’s wise to point out that an analysis by McKinsey found that large M&A deals rarely create value in medtech. The report entitled Value Creation in Medical Device M&A reviewed a total of 396 deals over a 15-year period between1999 to 2014. The report also evaluated 22 deals more closely that were worth at least $750 million. The conclusion was that compared with pharmaceutical deals, large medical device deals are neutral when it comes to total returns to shareholders.
Photo: bob_bosewell, Getty Images
