Abbott Labs is buying St. Jude Medical for $25 billion

Fabrizio Bensch/Reuters

Abbott Laboratories has agreed to buy St. Jude Medical for $25 billion, which will create a juggernaut in the market for heart devices.

St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing about $85 a share.

The companies already had a partnership selling cardiovascular products to hospitals. According to Bloomberg, makers of medical devices are merging to get better technologies and have stronger bargaining power with hospitals pushing for lower prices.

“St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation, and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair,” the statement said.

“Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets.”

The deal is expected to close in the fourth quarter of this year if St. Jude Medical shareholders approve and certain regulatory hurdles are cleared.

Abbott will own or refinance the nearly $5.7 billion in debt that St. Jude has, and it plans to fund the cash portion of the deal with medium- and long-term debt.

There will be annual pretax synergies of $500 million by 2020, the companies said.

St. Jude shares jumped 28% in premarket trading, while Abbott shares fell nearly 4%.

Evercore is Abbott’s lead financial adviser with Bank of America Merrill Lynch, who will also provide financing. Guggenheim Securities is advising St. Jude Medical.