CHICAGO — Abbott Laboratories announced Friday it plans to spin off much of its hospital products business, creating a company with estimated worldwide sales of $2.5 billion.
The move will allow Abbott to concentrate on higher-growth segments of its medical products business, according to Abbott chairman and CEO Miles D. White.
"With enhanced strategic, financial and operational flexibility, the new company will have freedom to pursue alliances and other expansion opportunities," White said in a statement.
The spin-off will be in the form of a tax-free distribution to Abbott shareholders of a new publicly traded stock for the new company. The value of the shares has not been determined, White said. The transaction, which is expected to be completed in the first half of 2004, will not affect Abbott's dividend.
Analyst Glen Reicin of Morgan Stanley noted Abbott is holding on to most of its brand-name drugs and its high-margin hospital supply products. He said it appears Abbott decided on which products to keep based on growth prospects.
The new company, which has not been named, will sell medication delivery systems, infusion therapy, critical care products and generic pharmaceuticals. The products currently account for a little less than 10 percent of Abbott's income.
Abbott will retain its proprietary hospital pharmaceuticals, pain management products and portions of the international hospital business. It also will retain Abbott Vascular Devices and the recently acquired Spinal Concepts.
Abbott officials say the sales growth for the new company's business components have been in the low- to mid-single digits. They expect the new company will have similar sales growth.
White said the spin-off will allow the new company to invest in and grow those product lines, which he said have been somewhat neglected. At the same time, it will enable Abbott to increase its focus and investment on higher-growth segments of its medical products business.
Christopher B. Begley, the current president of Abbott's U.S. hospital business, will be the chief executive officer of the new company, which will be headquartered in Lake Forest and employ about 14,000 people worldwide.
North Chicago-based Abbott posted $1.05 billion in profit for the first six months of the year, down 27 percent from $1.45 billion for the first half of 2002, though revenues rose 9 percent to $9.3 billion.