Why Is The St. Jude Acquistion A Risky Bet For Abbott?

July 6th, 2016 by Trefis Team
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ABT: Abbott Laboratories logo
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Abbott Laboratories

The St. Jude acquisition announced by Abbott (NYSE:ABT) is expected to provide significant synergies and the much needed growth for Abbott. However, this merger sets off alarm bells for Abbott’s investors, as the company will have to take on significant leverage to fund the acquisition. This might worsen the company’s debt ratios. Because of this, the rating agency – Fitch has also maintained a negative rating watch for Abbott. In the analysis below, we show how the net debt-EBITDA ratio of Abbott would increase post-merger. It must be noted that the net debt-EBITDA ratio shows how many years it would take for a company to pay back its debt, if net debt and EBITDA are held constant.

ABT_St.Jude_acquistion_Debt-EBITDA

Notes:

1) If you like or have any questions about our analysis, please write us back at content@trefis.com. We hope such lean communication sparks thinking, and encourages you to ask questions. The purpose of these analyses is to help you focus only on a few important things. 
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Abbott Laboratories

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