Abbott Laboratories acquires Advanced Medical Optics in $2.8 billion cash-and-debt deal

12 January 2009

Chicago-based medical products and drug maker Abbott Laboratories said today it will purchase Advanced Medical Optics Inc. (AMO) in a $2.8 billion deal including assumed debt - more than five times Advanced Medical's current market capitalisation - as it expands its medical-product services to meet new demand overseas.

At $22 per share, the deal amounts to a nearly 150 per cent premium for AMO shares, which closed on Friday at $8.85. However, AMO stock traded at $24.90 in June. AMO shares surged to $21.54 in pre-market trading, while shares of Abbott fell 12 cents to $51.05. Abbott's stock has fared better than the wider market in these tough economic times, off just 15 per cent since last January while the Dow Jones Industrial Average has fallen by a third.

Both companies' boards have approved the deal, which will take place through a tender offer. Abbott said the buyout would have no significant effect on earnings in 2009 and would add to profit in 2010. The companies expect the deal to close in the first quarter.

"Through superior vision care technologies and service, Advanced Medical has established itself as a leader in this multi-billion dollar medical device segment," Abbott Chairman and CEO Miles D White said in a statement. "With Advanced Medical, Abbott is enhancing and strengthening its diverse mix of medical device businesses and gaining a leadership position in another large and growing segment."

The company reaffirmed its 2008 profit guidance of $3.31 to $3.33 per share, excluding certain items. It expects profit between $3.65 and $3.70 in 2009. Analysts expect profit of $3.32 in 2008 and $3.66 in 2009.

Santa Ana, California-based AMO is the world's largest player in surgical devices for LASIK laser vision corrective procedures, according to the companies. It ranks No. 2 in the cataract surgical device market and No. 3 in contact lens care products.