100% Buyout Premiums Still Exist (ABT, EYE)

If we told you on Friday that a decent-sized medical merger was coming with a 100% premium, you probably wouldn’t have believed it.  We are having a hard time believing it even after the fact.  Abbott Laboratories (NYSE: ABT) is buying Advanced Medical Optics Inc. (NYSE: EYE). 

It seems almost imaginary that Advanced Medical Optics Inc. (NYSE: EYE)stock is up more than 100% today.  But it is.  Up 144% to $21.68 infact.

Abbott is spending about $1.36 billion plus debt to gain market sharein eye-care and laser vision.  The price for "EYE" holders is $22.00per share in cash.  It is of no surprise that the board of directorsapproved the deal.

Abbott said the deal will be neutral to 2009 earnings and it reaffirmedtargets of $3.31 to $3.33 EPS for 2008 and $3.65 and $3.70 EPS in2009.  Thomson Reuters (First Call) has consensus estimates at $3.32 in2008 and $3.66 in 2009.

This essentially exonerates Advanced Medical from the woes of its 2007eye drop infections which created a major recall and put a cloud overthe stock. 

Unfortunately, shares were north of $40.00 for a brief period less than two years ago.  That was then.

Jon C. Ogg
January 12, 2009