After the markets closed yesterday, General Electric (NYSE: GE) and Abbott Laboratories (NYSE: ABT) released announcements that the two companies had terminated the pending sale of Abbott’s two diagnostic business units to General Electric.
Abbott’s press release made the announcement in two sentences: “Abbott and GE have mutually agreed to terminate their contract for the sale of Abbott’s core laboratory and point-of-care diagnostics businesses to GE. The two companies were unable to agree on final terms and conditions of the proposed sale.”
GE’s press release said just a bit more: “General Electric announced today that GE and Abbott have agreed to mutually terminate their agreement relating to GE’s acquisition of Abbott’s primary in vitro and point-of-care diagnostics businesses. GE and Abbott worked diligently to complete the transaction but were unable to reach agreement on final terms and conditions. As a result, they agreed it was in the best interests of both companies to mutually terminate their agreement and discussions.”
The break-up of this deal is a significant development. For General Electric, it was a major healthcare acquisition. GE was ready to purchase Abbott’s primary in vitro diagnostics (IVD) business unit, along with a point-of-care testing business. Together, these Abbott businesses were estimated to generate about $2.5 billion in revenue last year. In fact, the price to be paid for of the Abbott diagnostics purchase was only slightly less than what GE paid for Amersham PLC in 2001, which was more than $9 billion.
There will be plenty of questions about why this deal fell apart. Was this a result of a changed financial picture at General Electric? Was something uncovered during due diligence that affected the acquisition as originally priced and structured – and the two parties could not negotiate a revised set of mutually-agreeable terms? Did either buyer or seller smell out a better deal, giving them motivation to see this acquisition agreement come apart?
Last year, Siemens (NYSE: SI) made similar investments to stake out a major position in the IVD marketplace. GE’s decision to abandon its acquisition of Abbott’s IVD businesses will probably not be the end of GE’s interest in in vitro diagnostics. It is probable that, in the coming months or years, GE will find another attractive IVD company to acquire.
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