Wall Street is still buzzing about Abbott’s (NYSE:ABT) plan to split itself into separate pharmaceutical and medical products businesses, with one investment house raising its estimate on ABT shares (which symbol the medical products business will keep) but another downgrading derivatives traded on its debt.
The health care giant dropped the bombshell news along with its third-quarter results last week, saying it planned to keep its medical products business under the Abbott banner and create a new, as-yet-unnamed public company from the pharma unit.
ABT shares initially soared after the news broke Oct. 19, rising more than 6 percent to a 52-week high of $55.61 before settling back down, ending the day at $53.25 (up 1.5 percent on the day). Share prices have hovered around that mark ever since, with shares down slightly to $53.57 as of about 1:20 today.
The plan met with a variety of responses and they’re still coming in. UBS boosted its price target for Abbott shares to $60 per share and kept its "buy" rating, according to TheStreet.com, as the investment bank believes the split will create value for shareholders.
But the folks who trade in securities derived from Abbott’s debt aren’t pleased by the split, which pushed an implied triple-A rating for its derivatives down, according to Bloomberg. Although it’s rated "A1," credit-default swaps tied to Abbott’s debt were trading as if they were rated "Aaa," the news service reported.
"The primary reason for the negative outlook is our concern that the strong earnings and cash flow at proprietary pharma are being carved out," Moody’s credit analyst Diana Lee told Bloomberg. "The uncertainty surrounding financial policies and growth strategy is another concern."
Abbott’s rating could dip up to two tiers, according to Joel Levington, a managing director at Brookfield Investment Management.
“It’s a modest benefit to the shareholder at the cost to bondholders,” Levington told the news service. “This is a credit-dilutive scenario. You’re giving up assets that generate a significant amount of cash and reducing your diversity.”
As for the pharma spinout’s acquisition prospects, a pair of pharmaceutical giant have already said they’re not likely to bite. Executives at Roche Holding AG (PINK:RHHBY) and Eli Lilly (ETR:LLY) said neither company is interested in acquiring the Abbott spinout and its blockbuster anti-inflammatory drug Humira (which is under patent until 2016).
There’s one group that’s likely to dig the split, at least according to Barron’s – current stockholders. The financial news rag is predicting a 10 percent jump for ABT shares ahead of the split.
Nobel Biocare surges on PE buyout rumors
Shares of Nobel Biocare (ETR:NLB1) surged nearly 20 percent on rumors that a pair of private equity firms are looking to buy the Swiss dental implants maker.
NLBI stock closed at €9.58 (about $13.34) on the European stock exchange today, up 19.8 percent from its €8 ($11.14) close Friday, despite a denial from its interim chairman that it’s talked to anyone about a buyout.
The speculation began with an article in the Swiss newspaper NZZ am Sonntag that EQT Partners AB and Bain Capital LLC were interested in buying Nobel, piqued by the huge valuation for Astra Tech earlier this summer. And even though interim chairman Rolf Watter said there have been no talks or contacts about an acquisition, investors hurried to snap up NLB1 shares.
A deal could be worth up to $2.2 billion, according to Dow Jones Newswire. Read more
Hologic leads list of top gainers
Here’s a look at the top gainers in health care equipment stocks, according to Financial News Netwrok:
- Hologic (NSDQ:HOLX): 5.73%
- Becton Dickinson (NYSE:BDX): 4.03%
- NxStage Medical (NSDQ:NXTM): 3.80%
- Steris Corp. (NYSE:STE): 3.52%
- Covidien (NYSE:COV): 3.28%.
BSX takes a beating on The Street
Boston Scientific (NYSE:BSX) is earning back some of the value it lost after posting its third-quarter earnings results last week.
Share prices slid 4.4 percent to $5.39 last Thursday in heavy trading after BSX reported a 25 percent profit decline.
BSX shares were trading at $5.51 as of about 1:20 today, up about 2.2 percent.