Abbott Laboratories will spend $19.3 billion to buy St. Jude Medical Inc. in a cash-stock deal that aims to strengthen the medical device maker's stake in cardiovascular care.
Shares of North Chicago, Illinois-based Abbott plunged, while St. Jude soared early Thursday morning after the companies announced the deal.
Abbott expects the combined company to compete in nearly every area of cardiovascular care. It noted that the acquisition will blend St. Jude's heart failure devices and cardiac rhythm management business with Abbott's coronary intervention and transcatheter mitral repair products.
Abbott said St. Jude shareholders will receive $46.75 in cash and a portion of Abbott stock for each St. Jude share. The total consideration adds up to about $85 per share.
That represents a 37 percent premium to Wednesday's $61.95 closing price of St. Jude shares.
The deal value totals $25 billion based on Abbott's recent stock price and assuming about $5.7 million in St. Jude debt.
Abbott makes medical devices and drugs, but infant formula and nutritional beverages, which includes the Similac, Ensure and Pedialyte brands, make up the company's biggest business. In February, Abbott said it would spend $4.8 billion on Alere Inc. to expand its medical testing business.
Abbott said the boards of both companies have approved the deal for St. Paul, Minnesota-based St. Jude. The companies expect the deal will close in the fourth quarter, but the acquisition still must be reviewed by regulators and approved by St. Jude shareholders.
Shares of Abbott sank almost 9 percent to $39.91 in premarket trading, while St. Jude jumped more than 23 percent, or $14.68, to $76.81.
Abbott shares had slid about 2 percent so far this year, as of Wednesday's close, while St. Jude stock climbed less than 1 percent.