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Abbott buys AMO, Gets Double-Digit Growth Segment

The ophthalmic industry has traditionally stood alone, with its own device and pharmaceutical companies selling products marketed to specialists. So the announcement on January 12 that diversified giant Abbott Laboratories would acquire Advanced Medical Optics was initially astonishing, as was the hefty premium that Abbott offered. Perhaps Abbott was willing to pay more than it otherwise would have because of the recent divestiture of its Abbott Spine business. In AMO, Abbott is getting a business that almost can't fail to grow by double digits (despite recent economic stresses on the laser vision correction market) because of the demographics of the ophthalmology industry and improving margins on products like intraocular lenses, which serve the burgeoning elderly cataract patient population.

The ophthalmic industry has traditionally stood alone, with its own device and pharmaceutical companies selling products marketed to specialists. So the announcement on January 12 that diversified giant Abbott Laboratories Inc. would acquire Abbott Medical Optics Inc. (AMO) was initially astonishing, as was the hefty premium that Abbott offered. [See Deal] Abbott will pay $22 per share in cash for AMO’s 62 million outstanding shares, a 149% premium over the ophthalmology company’s January 9th closing price of $8.85. Inclusive of AMO net debt, the total value of the transaction is about $2.8 billion, which is more than twice the $1.09 billion in sales revenues that AMO posted in 2007.

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