Abbott Laboratories announced today that it will split itself into two smaller companies. Shareholders would keep their shares in the main company while gaining ownership in the research division. It is but the latest firm to announce such a split, following McGraw-Hill, Kraft, and others.
Some details as reported by the New York Times.
Abbott’s plan would leave the company as one of the biggest makers of generic drugs, with about $22 billion in annual sales. But its products include a variety of other offerings, including Similac baby formula, stents and laser eye surgery products.
Among its chief attractions is the division’s fast international growth, deriving about 40 percent of its sales in emerging markets.
The research drug unit that is being spun off has about $18 billion in annual sales and is focused on developing specialty medicines to treat diseases like multiple sclerosis and cancer.
Its top-selling drug is Humira, a treatment for immune system diseases like rheumatoid arthritis that reaped $6.5 billion in sales last year.
Abbott is no stranger to mergers and sell-offs. It bought BASF’s pharmaceutical division Knoll in 2001, diabetes specialist TheraSense in 2004, and Solvay Pharmaceuticals in 2010 among others. The company has also sold off numerous brands over the years and spun off its hospital products division as Hospira in 2004.
The announced split continues a trend that counters the merger fever that swept many sectors of the economy during the 1990s and 2000s. Such waves often come to an end when markets take a turn for the worse, professor of management and strategy David Besanko told me in an earlier article. Companies may be looking to unload unprofitable divisions or bolster their reserves by selling the profitable ones.