What: Shares of the medical diagnostic company Alere (NYSE:ALR) jumped 45% today on a $5.8 billion buyout deal with Abbott Laboratories (NYSE:ABT). Abbott is reportedly paying $56 per share for Alere in an all-cash deal, representing a 50% premium compared to where Alere's shares were trading following Friday's close. Per the terms of the deal, Abbott will also assume $2.6 billion of Alere's outstanding debt.
So what: This buyout will significantly bolster Abbott's point-of-care testing portfolio for infectious diseases, and immediately add to the company's earnings upon closing. Perhaps the bigger issue, though, is that Abbott's willingness to execute a deal at a 50% premium shows that the appetite for M&A among healthcare companies hasn't wavered, despite the sector's massive sell-off last month.
Now what: According to S&P Capital IQ, Alere's product portfolio is expected to generate around $2.5 billion in sales in 2016. So, Abbott seems to be getting a fairly reasonable price for Alere's diagnostic assets, especially since the deal will grow the company's bottom line right away. That's why investors may want to take a deeper look at Abbott today.
George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.