Abbott Confirms Acquisition of Solvay, Fifth Purchase Attempt within the Year

U.S. major Abbott has confirmed the acquisition of Solvay pharmaceutical business. Abbott will disburse 4.5 billion euro (US$6.6 billion) in cash payments and will gain US$3 billion in annual sales from this purchase. Pending the accomplishment of certain sales targets between 2011 and 2013, an extra payment of 300 million euro will be also included within the deal.

Abbott and Solvay's board of directors have endorsed the transaction, which is expected to close by the first quarter of the following year (2010) pending customary and regulatory conditions.

Abbott's Rationale Behind the Transaction

Abbott's rationale behind this transaction follows in line with the company's recent purchasing spree, which has focused upon business growth and diversification. Solvay's acquisition brings particular benefits in the following areas:

• International Expansion: Abbott is expected to gain from Solvay's solid international presence, particularly within emerging markets (i.e. Eastern Europe and Asia). The purchase will also benefit Abbott's rights over Solvay's fenofibrate franchise, which will expand from the U.S. market to a global coverage.
• Therapeutic Sectors Development: Solvay's acquisition is expected to strengthen Abbott's presence within specific sectors. These include Abbott's diagnostic business, which will cover Solvay's small molecular diagnostics unit, and treatments for chronic diseases. Products for cardiovascular diseases, hormone disorders, neuroscience and gastroenterology drugs (i.e.: Parkinson's disease, Ménière's disease, vertigo, and irritable bowel syndrome) are expected to complement Abbott's current portfolio.
• Diversification of Products: With Solvay's acquisition, Abbott's process of diversification enters into an important stage as the company breaks into the rising global vaccine sector.
• R&D Resource Boost: Solvay's acquisition will bring significant prospects to boost Abbott's R&D activities. In fact, it will add US$500 million to the company's current budget for these sectors.

Fifth Transaction Initiated within this Year

Abbott's acquisition of Solvay is one of five acquisition deal attempts initiated by the company this year. These have included Evalve (U.S.), Visiogen (U.S.), Wockhardt (India) and Advanced Medical Optics (AMO; see United States: 13 January 2009: Abbott Acquires Advanced Medical Optics; see United States: 29 July 2009: Abbott in US$130-mil. Acquisition Deal for Wockhardt's Nutrition Business in India; United States: 3 September 2009: Abbott Acquires Visiogen in US$400-mil. Deal and United States: 11 September 2009: Abbott Consolidates Acquisition Agreement for Leading Device Firm Evalve).

Outlook and Implications

Abbott's acquisition of Solvay follows a very competitive bidding platform, which involved companies such as Nycomed (Switzerland; see United States: 25 September 2009: Abbott Considers Bidding for Solvay). Abbott's decision to rejoin this process reflects a strong strategy of short and long-term development, which focuses upon inorganic growth and diversification to secure a healthy financial performance in front of the current economic crisis and future difficulties.

While the Solvay group experienced a difficult year, the company's pharmaceuticals business was the only unit to report positive performance with a 3.4% y/y growth in sales to reach 1.3 billion euro for the first half of 2009 (see Belgium: 3 August 2009: Generic Competition Plagues UCB and Solvay in H1 as Growth from New Drugs is Slow to Materialise). As such, Solvay's acquisition is expected to bring significant opportunities for Abbott's 2010 financials, boost the company's pipeline expansion and innovative product investments.

Furthermore, Solvay's pharmaceutical products will complement and strengthen Abbott's current portfolio and provide a groundbreaking opportunity within the global market of vaccines. This is particularly important, taking into account the growing demand for this type of product on a global basis. Meanwhile, Solvay's emphasis on international markets, particularly emerging countries, will open a new door of opportunities within growing and profitable markets.