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Mylan to pay $5.3 billion for Abbott

Pennsylvania-based generic drug maker Mylan agreed to pay about $5.3 billion to acquire Abbott Laboratories’ specialty and generic pharmaceutical products portfolio in a handful of developed foreign markets, a deal expected to boost sales and profits.

Under the terms of the all-stock deal, Chicago-based Abbott (ABT) will receive 105 million shares of the combined company, representing a roughly 21% ownership stake of a newly formed company that will combine Mylan’s existing business and Abbott’s developed markets pharmaceuticals business. The valuation of the deal was based on Mylan’s (MYL) closing price of $50.20 on Friday.

The deal is expected to further diversify Mylan’s business outside the U.S., adding more than 100 pharmaceutical products in five major therapeutic areas, including cardio/metabolic gastrointestinal and anti-infective/respiratory. Mylan, which generated $6.9 billion in revenue in 2013, has grown to become one of the largest generic and specialty pharmaceutical companies in the world through organic growth and acquisitions.

The deal, which is expected to close in the first quarter of 2015, is expected to bolster Mylan’s revenue by about $1.9 billion annually. On a per-share basis, Mylan expects it will add about 25 cents to adjusted profit in the first year, increasing thereafter through 2018.

The assets Abbott is unloading includes an active sales organization of about 2,000 representatives and more than 40 non-U.S. markets, including various European countries, Japan, Canada and Australia. The deal also includes two manufacturing facilities. Some key products being sold to Mylan include Creon, Influvac, Brufen and Amitiza. Abbott, meanwhile, will retain its branded generics pharmaceuticals business and products in emerging markets, as well as other businesses and products in developed markets. About 3,800 Abbott employees work for the business that is being sold to Mylan.

Abbott also said it doesn’t expect to be a long-term shareholder in Mylan, intending to redeploy the net proceeds from the deal to “opportunities that would be accretive to earnings over time.”

The deal is the latest merger and acquisition action in the very active pharmaceutical industry. The number of pharma and life sciences deals, including medical device and diagnostic companies, increased 40% over the first quarter compared to a year earlier, according to research by PwC.