Abbott to Buy Solvay Drug Unit for $7 Billion NYSE: ABT

This just in from the WSJ. Abbott Labs (ABT) acquires Solvay conglomerate for 7B, or 4.8B eu.

Abbott to Buy Solvay Drug Unit for $7 Billion
Abbott Laboratories has struck a deal to acquire the pharmaceutical unit of Belgian conglomerate Solvay SA for roughly €4.8 billion ($7 billion), in another sign of the consolidation of the drug industry.

The all-cash deal could be announced as soon as Monday, people familiar with the matter said. Abbott will pay €4.5 billion now and up to €300 million between 2011 and 2013 if the business hits certain targets, according to two people familiar with the situation.

Abbott sees Solvay as a way to expand into emerging markets in Eastern Europe and Asia, where Abbott had limited presence, while adding new drugs for hypertension and Parkinson's disease. It is the biggest deal Abbott has done since 2002.

The deal also gives Abbott full control of two drugs for cholesterol and triglycerides that Abbott and Solvay already sell together -- Tricor and Trilipix.

Solvay also sells hormone treatments and has a small flu-vaccine business -- a hot area in the drug industry as concern mounts about flu pandemics. In a news release in early September, Solvay said it had begun producing small batches of vaccine for the H1N1 swine-flu virus, which it planned to test in studies. Abbott may be hoping to boost investment in that business to take advantage of the current desire of many countries to buy H1N1 vaccine, though it is unclear how quickly Solvay's factories could produce it in large quantities.

Abbott will pay for the deal from existing cash on hand and won't go to the markets to raise acquisition financing, said a person familiar with the matter.

For Solvay, a sale will enable it to narrow its focus and invest more in the two other areas where it already gets more revenue, chemicals and plastics.

Analysts say Abbott needs to lessen its reliance on Humira, a drug for rheumatoid arthritis that had $4.5 billion in sales last year, 15% of Abbott's net income.

Even amid a slowdown in mergers and acquisitions over the past year, there has been a wave of pharmaceutical deals, led by Pfizer Inc.'s roughly $62 billion takeover of Wyeth and Merck's roughly $41 billion deal to acquire Schering-Plough Corp. Drug companies are rich in cash and looking for new products to offset those losing patent protection and sales to generic copies.

The price tag is good news for shareholders of Solvay. The shares have already surged 42% since the company announced it was considering selling the division on April 1, and they closed Friday at €74.73 in Brussels.

Abbott outbid Swiss drug company Nycomed, which was widely expected to win the auction before Abbott came on strong in recent weeks.

For Nycomed, the failed bid represents the second time lately that its M&A ambitions have been frustrated. Earlier this year, the firm quietly sounded out possible buyers, to no avail. When Solvay's drug unit went on the block, it provided Nycomed with an opportunity to bulk up in advance of a possible initial public offering of stock.

Barclays PLC's investment bank advised Abbott on the Solvay deal; Morgan Stanley, Citigroup Inc. and NM Rothschild & Sons Ltd. advised Solvay.

—Jonathan Rockoff contributed to this article.
Write to Jeanne Whalen at jeanne.whalen@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Jeffrey McCracken at jeff.mccracken@wsj.com
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