The FINANCIAL — Abbott on September 28 announced a definitive agreement with the Solvay Group for Abbott to acquire Solvay's pharmaceuticals business for EUR 4.5 billion ($6.6 billion) in cash, providing Abbott with a large and complementary portfolio of pharmaceutical products and a significant presence in key global emerging markets.
The acquisition also includes full global rights to the fenofibrate franchise. Currently Abbott has U.S. rights to fenofibrate and pays royalties to Solvay.
Belgium-based Solvay Pharmaceuticals will add more than $3 billion in annual sales, the majority outside the U.S. Solvay has significant presence and infrastructure in key high-growth emerging markets, including Eastern Europe and Asia. Emerging markets are growing faster and increasing in importance due to demographics, rising incomes and expanded treatment of chronic disease.
The acquisition will also add approximately $500 million to Abbott's annual pharmaceutical R&D investment, providing Abbott with the opportunity to further accelerate near and long-term pharmaceutical growth.
"The acquisition of Solvay Pharmaceuticals further diversifies our pharmaceutical portfolio, expands our presence in key high-growth emerging markets, enhances our investment in R&D and accelerates our long-term earnings-per-share growth outlook," said Miles D. White, chairman and chief executive officer, Abbott.
"In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach to serve patients globally and continue to deliver sustainable industry-leading growth. This acquisition, as well as the others we've announced this year all contribute to achieving that long-term goal," said Mr. White.
"With this transaction Solvay Pharmaceuticals has found a new strong home, within a respected company with a solid and committed position in the industry," comments Christian Jourquin, chief executive officer, Solvay.
"Solvay's pharmaceutical portfolio complements Abbott's presence and expertise in specialty markets such as cardiovascular disease, neuroscience and gastroenterology. Solvay has treatments for Parkinson's disease, Ménière's disease (abnormality of the inner ear), vertigo, and irritable bowel syndrome. Solvay also offers products to treat men's and women's hormonal health, and exocrine pancreatic insufficiency (inability to properly digest food), which is associated with several underlying conditions including cystic fibrosis and chronic pancreatitis," Abbott informs.
The acquisition also includes Solvay's vaccines business, which will provide Abbott entry into the expanding global vaccines market. Solvay has a small molecular diagnostics unit that will become part of Abbott's diagnostics organization upon the transaction close.
"Abbott's international pharmaceutical business has grown significantly over the past several years, driven by specialty products in developed markets," said Olivier Bohuon, executive vice president, Pharmaceutical Products Group, Abbott. "In emerging markets where chronic disease is being treated more aggressively, the combined Abbott and Solvay portfolio of branded generics expands the global reach of these medicines. Solvay's business will also give us a platform to enter the attractive global vaccines market."
Financial Highlights
The transaction will be approximately $0.10 accretive to ongoing earnings per share in 2010, accelerating to more than $0.20 by 2012, increasing thereafter, all before one-time transaction-related items, which will be provided at a later date. These one-time transaction-related items are expected to occur between 2010 and 2012. The transaction also includes payments of up to EUR 300 million if certain sales milestones are met between 2011 and 2013.
Abbott plans to fund the transaction with cash currently on the balance sheet.
This transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2010. As a result, the deal will have no impact on 2009 ongoing earnings per share. The boards of directors of both companies have approved the proposed acquisition.
Barclays Capital served as an exclusive financial advisor to Abbott on this transaction.
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