Zoetis To Buy Abaxis In $2 Billion Deal

Keeping alive the deal momentum in the health care space, another multi-billion-dollar deal was announced Wednesday morning.

What Happened

Zoetis Inc ZTS, an animal health company, announced a deal to acquire Abaxis Inc ABAX, a developer of portable blood analysis systems used in human or veterinary patient care, for $83 per share in cash or a total of $2 billion.

This represented a 15.8 percent premium over the $71.75 percent at which Abaxis closed Tuesday's session. Reacting to the announcement, shares of Abaxis were rallying 14.91 percent to $82.45 in pre-market trading.

The logic of the deal? Zoetis looks to boost its presence in veterinary diagnostics, touted to be a market opportunity with a CAGR of 10 percent, through this deal.

"This acquisition brings Zoetis a company that has a proven, competitive diagnostic platform for growth that we can help to accelerate in the U.S. and worldwide with our global scale and direct customer relationships in approximately 45 countries," CEO Juan Ramón Alaix said in the press release.

Zoetis said it will finance the purchase through a combination of cash and new debt.

Why It Is Important

Zoetis expects the transaction to be accretive to its earnings in 2019, and be neutral on an adjusted basis in 2018.

Abaxis, with its intensive investments in expansion into Europe, Latin America and the Asia-Pacific region, derived about 20 percent of its FY18 revenues from international operations.

"The Abaxis VetScan portfolio includes chemistry and hematology diagnostic instruments and companion discs, kits and cartridges, which are consumables that create a recurring revenue stream," the company said in the release. Consumables accounted for 78 percent of the company's FY2018 revenues.

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