by
Thomas Dworetzky, Contributing Reporter | September 19, 2016
Johnson & Johnson is snapping up Abbott Medical Optics (AMO) for $4.325 billion in cash.
The wholly-owned subsidiary of Abbott Laboratories had 2015 sales of $1.1 billion.
The deal also gives Johnson & Johnson AMO's products in cataract surgery, laser refractive surgery and consumer eye health.
Eye health is a large, fast-growing health care segment. "With the acquisition of Abbott Medical Optics' strong and differentiated surgical ophthalmic portfolio, coupled with our world-leading ACUVUE contact lens business, we will become a more broad-based leader in vision care,” Ashley McEvoy, company group chairman, responsible for Johnson & Johnson's Vision Care Companies said in a statement, noting that “with this acquisition we will enter cataract surgery – one of the most commonly performed surgeries and the number one cause of preventable blindness."
AMO is a leader in the intraocular lens market for cataract surgery, which the World Health Organization estimates will grow as people live longer. Presently, it is estimated that age-related cataracts have caused blindness in 20 million worldwide – with another 100 million eyes affected by the treatable condition.
"Our vision care business will be well-positioned for continued success and advancement with Johnson & Johnson," Miles D. White, chairman and chief executive officer of Abbott, said in a statement, adding that in addition to vision-related care, "we've been actively and strategically shaping our portfolio, which has recently focused on developing leadership positions in cardiovascular devices and expanding diagnostics."
The transaction is slated to complete in the first quarter of next year and the net impact of the deal should not cause a change in Abbott's 2017 per-share earnings.
The deal won't disrupt the rest of Abbott, as it was “a self-contained business and had very little synergy with anything else in their device portfolio,” Morningstar analyst Debbie Wang
told Bloomberg.
She advised that it looked to be part and parcel with a move by CEO White to redirect the firm through a number of moves – the 2013 spinoff of AbbVie, and the agreements to acquire medical testing firm Alere and device maker St. Jude.
The Abbott move, she suggested, is part of this larger strategy that aims to take Abbott “down the path of these more sophisticated products.”
The deal will provide cash for these other acquisitions, Bloomberg noted. Abbot picked up the optics division in 2009 for $2.8 billion and it now needs $25 billion for the St. Jude deal and $5.8 billion for Alere.
“A lot of people in the market are going to look at this and say this will preclude [Abbott] from having to do [an] equity raise, which investors would like,” Bloomberg Intelligence analyst Jonathan Palmer noted. “It makes the financial aspects of both deals easier to manage or swallow.”
