Abbott’s Mylan Billions Open Door for Bigger Purchases: Real M&A
2015-05-07 21:55:27.873 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Brooke Sutherland and Michelle Fay Cortez
(Bloomberg) -- Mylan NV’s three-way deal drama is putting
the spotlight on a fourth player: Abbott Laboratories.
Abbott is the largest holder of Mylan after swapping its
established-markets drug business for Mylan stock in February.
Since then, Mylan shares have surged more than 20 percent as the
drugmaker pursues Perrigo Co. and fends off advances from Teva
Pharmaceutical Industries Ltd.
Mylan’s rise has added billions to the value of Abbott’s
stake, leaving it at about $5 billion even after Abbott sold
some of the shares, according to data compiled by Bloomberg.
That gives Chief Executive Officer Miles White a bigger bankroll
to spend on the acquisitions, big and small, that he’s looking
for.
Investors “might get a little noisier about what the next
steps are several quarters out if they don’t start to see how
that money is being spent,” Jeff Windau, a St. Louis-based
analyst at Edward Jones & Co., said by phone. “You’re going to
see potentially more questions to management.”
Since splitting with AbbVie Inc. in 2013, Abbott has shied
away from big purchases. Meantime, its former sister has pursued
two blockbuster deals valued at more than $70 billion combined.
Abbott instead has focused on rounding out its generic-drug
offerings in emerging markets and adding new technology for the
$69 billion company’s device and diagnostics businesses.
Abbott doesn’t need acquisitions to fuel growth in the same
way that AbbVie does as a drug developer facing the expiration
of its biggest product Humira, so Abbott may continue to steer
away from big takeovers, said Jeff Vancavage, a fund manager at
Abbott shareholder Eagle Asset Management Inc. Still, Abbott’s
growing resources mean investors are going to be looking for
more than $100 million deals.
Sweet Spot
A purchase of $2 billion to $4 billion may be in the sweet
spot, said George Strietmann of Bahl & Gaynor Investment Counsel
Inc. A takeover that ranked on the high end of that range would
be Abbott’s biggest yet since splitting with AbbVie.
“They certainly have room to do a fairly good-sized
acquisition,” Strietmann, a principal and fund manager at Bahl
& Gaynor, which oversees about $14 billion, including shares of
Abbott, said in a phone interview. “I would expect them to
continue doing more fine-tuning of their businesses.”
Deal Capacity
On an April 22 call with analysts, CEO White said “I
wouldn’t want you to think you’re only going to see ‘little’ out
of me” and he can’t rule out bigger additions. Abbott still
holds about 70 million of the 110 million shares it received
from Mylan, data compiled by Bloomberg show. Abbott has the
ability to do an acquisition of up to about $25 billion, said
Jonathan Palmer of Bloomberg Intelligence.
If White wanted to be bold, he could transform Abbott into
a cardiovascular powerhouse with an acquisition of St. Jude
Medical Inc., said Jeff Jonas, a fund manager at Gabelli. St.
Jude has a market value of $20 billion. Edwards Lifesciences
Corp., a $13 billion company, is another big acquisition target
that would build out Abbott’s cardiovascular business, said Igor
Golalic of Diamond Hill Capital Management.
“The one I dream about is for them to buy St. Jude,”
Jonas said. “There are a ton of synergies and you could make it
work.”
Both St. Jude and Edwards Lifesciences are probably too
pricey right now for Abbott, even if they would be ideal fits,
said Jonas and Golalic. Diamond Hill owns Abbott shares among
the $16 billion in assets that it oversees.
Scott Stoffel, a spokesman for Abbott Park, Illinois-based
Abbott, declined to comment. A representative for St. Paul,
Minnesota-based St. Jude also declined to comment, while a
representative for Irvine, California-based Edwards Lifesciences
didn’t return a phone call or e-mail seeking comment.
Perrigo Possibility
Another possibility would be to go up against Mylan in the
pursuit of Perrigo. Abbott would be a better acquirer of the $30
billion company, Kyle Bass, founder of Hayman Capital
Management, said at the SkyBridge Alternatives Conference in Las
Vegas on Thursday. Abbott is one of the few large pharmaceutical
companies that doesn’t have name-brand products that would
compete with Perrigo’s store labels, Jefferies Group said last
year.
Abbott’s acquisition strategy isn’t a matter of intent, but
of timing, CEO White said in April. Market valuations and
targets’ willingness to engage on a deal come into play, he
said.
Whatever its next target, Abbott should make the most of
the surge in Mylan shares and cash in its stake, said Vancavage
of Eagle Asset, which oversees about $32 billion.
“They said from the beginning that they weren’t going to
be long-term shareholders in Mylan and with this type of
opportunity, it’s kind of hard to pass up,” the investor said
by phone. “You don’t want to be left holding the bag.”
Buyback Option
If Abbott can’t find an acquisition, it will likely make a
large share repurchase, said Palmer of Bloomberg Intelligence.
Sitting on the cash isn’t an option.
“The cash pile will just get so big that the optics of it
would be a negative in investors’ eyes if they don’t do
something with it,” he said in a phone interview. “The CEO has
been very vocal about wanting to do deals. They already did the
big spin here with AbbVie so I think his track record speaks to
being pretty willing to pull the trigger.”
For Related News and Information:
Mylan’s Three-Way Deal Dance Is a Win for Shareholders: Real M&A
Mylan Deal Is Abbott’s Gain as Drugmaker’s Stake Grows and Grows
Abbott’s Asset Sale Provides Ammunition for Perrigo: Real M&A
Bass Recommends Perrigo, Says Abbott Better Acquirer Than Mylan
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
To contact the reporters on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net;
Michelle Fay Cortez in Minneapolis at +1-612-991-8887 or
mcortez@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net;
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net
Elizabeth Wollman
2015-05-07 21:55:27.873 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Brooke Sutherland and Michelle Fay Cortez
(Bloomberg) -- Mylan NV’s three-way deal drama is putting
the spotlight on a fourth player: Abbott Laboratories.
Abbott is the largest holder of Mylan after swapping its
established-markets drug business for Mylan stock in February.
Since then, Mylan shares have surged more than 20 percent as the
drugmaker pursues Perrigo Co. and fends off advances from Teva
Pharmaceutical Industries Ltd.
Mylan’s rise has added billions to the value of Abbott’s
stake, leaving it at about $5 billion even after Abbott sold
some of the shares, according to data compiled by Bloomberg.
That gives Chief Executive Officer Miles White a bigger bankroll
to spend on the acquisitions, big and small, that he’s looking
for.
Investors “might get a little noisier about what the next
steps are several quarters out if they don’t start to see how
that money is being spent,” Jeff Windau, a St. Louis-based
analyst at Edward Jones & Co., said by phone. “You’re going to
see potentially more questions to management.”
Since splitting with AbbVie Inc. in 2013, Abbott has shied
away from big purchases. Meantime, its former sister has pursued
two blockbuster deals valued at more than $70 billion combined.
Abbott instead has focused on rounding out its generic-drug
offerings in emerging markets and adding new technology for the
$69 billion company’s device and diagnostics businesses.
Abbott doesn’t need acquisitions to fuel growth in the same
way that AbbVie does as a drug developer facing the expiration
of its biggest product Humira, so Abbott may continue to steer
away from big takeovers, said Jeff Vancavage, a fund manager at
Abbott shareholder Eagle Asset Management Inc. Still, Abbott’s
growing resources mean investors are going to be looking for
more than $100 million deals.
Sweet Spot
A purchase of $2 billion to $4 billion may be in the sweet
spot, said George Strietmann of Bahl & Gaynor Investment Counsel
Inc. A takeover that ranked on the high end of that range would
be Abbott’s biggest yet since splitting with AbbVie.
“They certainly have room to do a fairly good-sized
acquisition,” Strietmann, a principal and fund manager at Bahl
& Gaynor, which oversees about $14 billion, including shares of
Abbott, said in a phone interview. “I would expect them to
continue doing more fine-tuning of their businesses.”
Deal Capacity
On an April 22 call with analysts, CEO White said “I
wouldn’t want you to think you’re only going to see ‘little’ out
of me” and he can’t rule out bigger additions. Abbott still
holds about 70 million of the 110 million shares it received
from Mylan, data compiled by Bloomberg show. Abbott has the
ability to do an acquisition of up to about $25 billion, said
Jonathan Palmer of Bloomberg Intelligence.
If White wanted to be bold, he could transform Abbott into
a cardiovascular powerhouse with an acquisition of St. Jude
Medical Inc., said Jeff Jonas, a fund manager at Gabelli. St.
Jude has a market value of $20 billion. Edwards Lifesciences
Corp., a $13 billion company, is another big acquisition target
that would build out Abbott’s cardiovascular business, said Igor
Golalic of Diamond Hill Capital Management.
“The one I dream about is for them to buy St. Jude,”
Jonas said. “There are a ton of synergies and you could make it
work.”
Both St. Jude and Edwards Lifesciences are probably too
pricey right now for Abbott, even if they would be ideal fits,
said Jonas and Golalic. Diamond Hill owns Abbott shares among
the $16 billion in assets that it oversees.
Scott Stoffel, a spokesman for Abbott Park, Illinois-based
Abbott, declined to comment. A representative for St. Paul,
Minnesota-based St. Jude also declined to comment, while a
representative for Irvine, California-based Edwards Lifesciences
didn’t return a phone call or e-mail seeking comment.
Perrigo Possibility
Another possibility would be to go up against Mylan in the
pursuit of Perrigo. Abbott would be a better acquirer of the $30
billion company, Kyle Bass, founder of Hayman Capital
Management, said at the SkyBridge Alternatives Conference in Las
Vegas on Thursday. Abbott is one of the few large pharmaceutical
companies that doesn’t have name-brand products that would
compete with Perrigo’s store labels, Jefferies Group said last
year.
Abbott’s acquisition strategy isn’t a matter of intent, but
of timing, CEO White said in April. Market valuations and
targets’ willingness to engage on a deal come into play, he
said.
Whatever its next target, Abbott should make the most of
the surge in Mylan shares and cash in its stake, said Vancavage
of Eagle Asset, which oversees about $32 billion.
“They said from the beginning that they weren’t going to
be long-term shareholders in Mylan and with this type of
opportunity, it’s kind of hard to pass up,” the investor said
by phone. “You don’t want to be left holding the bag.”
Buyback Option
If Abbott can’t find an acquisition, it will likely make a
large share repurchase, said Palmer of Bloomberg Intelligence.
Sitting on the cash isn’t an option.
“The cash pile will just get so big that the optics of it
would be a negative in investors’ eyes if they don’t do
something with it,” he said in a phone interview. “The CEO has
been very vocal about wanting to do deals. They already did the
big spin here with AbbVie so I think his track record speaks to
being pretty willing to pull the trigger.”
For Related News and Information:
Mylan’s Three-Way Deal Dance Is a Win for Shareholders: Real M&A
Mylan Deal Is Abbott’s Gain as Drugmaker’s Stake Grows and Grows
Abbott’s Asset Sale Provides Ammunition for Perrigo: Real M&A
Bass Recommends Perrigo, Says Abbott Better Acquirer Than Mylan
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
To contact the reporters on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net;
Michelle Fay Cortez in Minneapolis at +1-612-991-8887 or
mcortez@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net;
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net
Elizabeth Wollman