Can the St. Jude Medical-Abbott Deal Get Antitrust Approval?

Huge Deal in the Healthcare Space: Abbott Buys St. Jude Medical

(Continued from Prior Part)

Regulatory approvals

With most mergers, the rate of return is driven by the time it takes to finalize the transaction. In the case of the St. Jude Medical (STJ)-Abbott (ABT) merger, several conditions must be met before the transaction can close. While there will be an antitrust review, the U.S. Securities and Exchange Commission’s approval of the S-4 will probably be the gating item.

Antitrust approval

Professional arbitrageurs usually go to the respective companies’ 10K to get a read on antitrust and to see if the companies name each other as competitors. Neither St. Jude nor Abbott name each other as competitors in their respective 10Ks. On the surface, it looks like a complementary transaction in that both companies carved out niches in their respective cardiovascular businesses. There is overlap in the Atrial Fibrillation segment. This could cause a second request from the US government. The major players in atrial fibrillation include St. Jude, Boston Scientific (BSX), Johnson & Johnson (JNJ), Sanofi-Aventis, Endoscopic Technologies, Boehringer Ingelheim GmbH ,and others. Without market share data, it’s hard to determine whether this will present an antitrust issue. However, the companies seem to be building in at least some risk given the timing language.

Best efforts language

The companies agreed to use reasonable best efforts to obtain antitrust approval. They agreed to cooperate with each other to satisfy antitrust authorities and to litigate if necessary. They placed a cap of $325 million in revenues on divestitures.

Other merger arbitrage resources

Other important merger spreads include the Cigna (CI)-Anthem (ANTM) deal. It’s slated to close in 2H16. For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the healthcare sector should look at the S&P SPDR Healthcare ETF (XLV)

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Abbott Buys St. Jude Medical for $85 per Share in Cash and Stock

• Part 2 - Rationale for the St. Jude Medical-Abbott Merger Transaction

• Part 3 - What Are the Basics of the St. Jude Medical-Abbott Transaction?