GE, Abbott call off $8.13 billion deal
By Our Corporate Bureau | 14 Jul 2007
Mumbai: General Electric Corporation and Abbott Laboratories have called off GE's proposed $8.13 billion acquisition of Abbott's diagnostics units as they failed to agree on the terms of sale.
Abbott with $2.7 billion in annual sales and products which include devices that test blood proteins for heart disease, will not sell its diagnostic operations now.
"We believe this remains a highly valuable business, and our intent is to manage it within Abbott," said spokeswoman Melissa Brotz.
GE, the world's biggest maker of medical-imaging machines, would have acquired Abbott's diagnostics business as the latter wanted to increase its focus on the higher-profit pharmaceutical units.
The sale agreement was announced in January and its cancellation on June 11. GE said it would discuss plans for the cash the company would have paid for the Abbott units, during its earnings conference call on June 13.
"GE and Abbott worked diligently to complete the transaction but were unable to reach agreement on final terms and conditions," said the statement from Fairfield, Connecticut -based GE. "As a result, they agreed it was in the best interests of both companies to mutually terminate their agreement and discussions."
But, analysts and industry observers said Abbott was likely to sell the units to another buyer.
GE, in fact, had agreed to pay more than analysts expected to acquire Abbott's primary invitro diagnostics business, which makes blood and urine tests to diagnose diseases, and Abbott's point-of-care diagnostics business. The deal did not include Abbott's faster-growing molecular diagnostics and diabetes-testing businesses.
The deal had been contentious almost from the start, with much concern surrounding a March Food and Drug Administration warning related to one of Abbott's manufacturing facilities in Dallas. Analysts expected an adjusted price related to the higher regulatory risk GE would have taken on.
Abbott's diagnostic unit has been hampered by manufacturing issues that have had the division under the US Food and Drug Administration supervision since 1999. All but one manufacturing site passed FDA inspection within recent months.
Analysts, however, say a new buyer will likely appear after Abbott has a chance to reassess the M&A landscape, adding that the price Abbott would get for the units will likely decrease.
Abbott had been expected to use the cash proceeds to pay down an increased debt which rose earlier this year when it paid $3.7 billion to buy Kos Pharmaceuticals Inc. and last year, when it bought Guidant Corp.'s vascular business.
For GE, the purchase would have added $2.7 billion in annual sales to its healthcare business and added to its efforts to sell products used in the early detection of diseases.
Although analysts doubt the future direction GE will take in relation to diagnostics, they don't see any immediate drawbacks to the deal's failure.
