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Abbott-Alza set $7.3B deal
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June 21, 1999: 8:41 p.m. ET
Stock swap is latest big merger in pharmaceutical industry
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NEW YORK (CNNfn) - Abbott Laboratories, the nation's No. 6 drug maker, said Monday it agreed to buy Alza Corp., a leading maker of drug delivery systems, in a $7.3 billion stock swap that is the latest big merger in the pharmaceutical industry.
Abbott (ABT), which makes ulcer drugs, the anti-AIDS drug Norvir and Similac infant formula, said the deal would bring it several medicines that can be marketed by Abbott's sales force as well as others under development.
Alza, based in Palo Alto, Calif., makes skin patches and other devices for drug delivery as well as cancer and urological drugs. It earned $108 million, or $1.07 a diluted share, on sales of $647 million last year and employed 2,000 people.
Abbott, based in Illinois, had sales of $12.5 billion and net earnings of $2.3 billion, or $1.51 a diluted share, last year. It has 56,000 employees.
Drug makers have been merging in a bid to find new products and cut the long time and huge amount of money it takes to develop new medicines.
In another big industry merger announced in December, Britain's Zeneca and Sweden's Astra announced an all-stock deal worth about $35 billion that would create the world's No. 5 drug maker, measured by sales.
"Our acquisition of Alza is an excellent strategic fit and an important step that builds on our pharmaceutical business and accelerates Abbott's long-term growth," Abbott Chairman Miles White said in a statement.
Under the deal, Alza shareholders will get 1.20 shares of Abbott stock, worth $53.03 at Monday's prices, for each share of Alza. Rumors about a deal surfaced last week, driving up the price of Alza's stock.
Alza stock rose 1/4 to 46-1/4 while Abbott stock fell 1/2 to 44-3/16. The deal was announced after the close of trading.
Abbott said it expects to record a $100 million charge related to the merger when the deal is completed, which it expects later this year.
It said the merger would hurt earnings by about 3 cents a share in 2000 and add to profits thereafter.
The deal is subject to approval by Alza's stockholders and regulators.
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