Zoetis Inc. (ZTS - Free Report) announced a definitive deal to acquire Caifornia-based Abaxis Inc. , a leading global provider of veterinary point-of-care diagnostic instruments, for $83 per share in cash or a total of $2 billion.
The price offered by Zoetis represented about a 16% premium over the $71.75 at which Abaxis closed on May 15. Shares of Abaxis went up 15% following the news of the acquisition.
Shares of Zoetis have increased 15% year to date as against the industry’s decline of 3.6%.
The deal is expected to boost Zoetis’ presence in veterinary diagnostics portion of the animal health market. This sector has witnessed an annual compound growth rate of about 10% over the past three years. With the acquisition, Zoetis will get access to Abaxis’ VetScan portfolio of bench top and handheld diagnostic instruments and consumables Zoetis plans to provide a broader range of veterinary diagnostics products leveraging its global scale and direct customer relationships.
Zoetis expects the veterinary diagnostics category to continue to grow faster than the animal health industry, with growth in the mid to high single digits.
Abaxis derived 83% ($201.9 million) of annual revenue in fiscal 2018 from diagnostic products and services for the veterinary market. The company’s revenues of $244.7 million for the fiscal ended Mar 31, 2018, of which 83% ($201.9 million) was derived from diagnostic products and services for the veterinary market.
The deal is subject to customary closing conditions, including regulatory approvals and the approval of Abaxis shareholders. Zoetis expects to complete the acquisition before the end of 2018, and it intends to fund the purchase through a combination of existing cash and new debt. The company expects the transaction to be accretive to the company’s earnings in 2019.
Zacks Rank & Stocks to Consider
Zoetis carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the same space worth considering are Ligand Pharmaceuticals (LGND - Free Report) , and Enanta Pharmaceuticals, Inc. (ENTA - Free Report) . While Ligand sports a Zacks Rank #1 (Strong Buy), Enanta carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Ligand’s earnings per share estimates have moved up from $3.91 to $4.37 for 2018 over the last 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters, with an average beat of 31.79%. The company’s shares have rallied 41.1% year to date.
Enanta’searnings per share estimates have moved up from 86 cents to $2.97 for 2018 over the past 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 372.02%. The stock has rallied 79.6% so far this year.
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