Are Abaxis Shareholders Getting Enough in the Buyout?

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Abaxis Inc. (NASDAQ: ABAX) shares hit an all-time high early on Wednesday after it was announced that Zoetis Inc. (NYSE: ZTS) would be acquiring the firm. The acquisition is expected to enhance Zoetis’ presence in veterinary diagnostics, a category of the animal health industry with approximately 10% compound annual growth over the past three years.

In its most recent fiscal year ended in March, Abaxis reported $1.29 in earnings per share. The revenue of $244.7 million represented an increase of 8% year over year. Its VetScan portfolio of benchtop and handheld diagnostic instruments and consumables serves a large customer base of veterinary practices in North America and is poised for expansion in international markets.

Under the terms of the agreement, Abaxis will be acquired for $83 per share, or an aggregate of $2.0 billion. This represents a premium of about 15% compared to its most recent closing price of $72.17.

Looking at the 50-day and 200-day moving averages of $71.75 and 56.66, respectively, the firm is getting premiums of 15.7% and 46.5%.

Juan Ramón Alaix, CEO of Zoetis, commented:

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. Together we can bring more veterinarian customers a broader range of products that fit into our comprehensive solutions and innovations, from prediction and early detection of disease in animals to prevention and treatment. We are very excited by the passion for customers that Abaxis and Zoetis colleagues share.

Shares of Zoetis traded early Wednesday at $82.50, with a consensus analyst price target of $86.94 and a 52-week trading range of $59.50 to $86.38.

Abaxis traded up about 15% at $82.75 per share. The consensus price target was $64.63, and the prior 52-week range was $43.66 to $78.53.