Abbott Laboratories (ABT - Free Report) recently announced that the company has separated its research-based pharmaceuticals business by creating a new company – AbbVie (ABBV - Free Report) .
The decision to spin off the business was taken back in October 2011 when Abbott decided to separate its business into two publicly traded companies – one in diversified medical products and the other in research-based pharmaceuticals.
The research-based pharmaceutical company, AbbVie, includes proprietary pharmaceuticals and biologics including products like Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. The business generated sales of approximately $17.4 billion in 2011 while sales are expected to exceed $18 billion in 2012.
The diversified medical products company, with estimated sales of about $23 billion, includes Abbott’s branded generic pharmaceutical, devices, diagnostic and nutritional businesses.
The existing shareholders of the parent company generally get new shares in the subsidiary when the company spins off one of its business into a separate company. The subsidiary becomes a separate legal entity with its own management team and board of directors.
On Nov. 28, 2012, Abbott declared a special dividend distribution of all outstanding shares of AbbVie common stock. The shareholders of Abbott received one share of AbbVie common stock on Jan. 1, 2013 for every one share of Abbott common shares held as of close of business on Dec. 12, 2012.
The company is looking to ensure growth through this split. We are positive on the split which should allow the two separate entities to perform in a more focused manner.
As expected, the news was well received by investors with Abbott’s shares increasing 2.27% in regular trading to close at $32.05.
We currently have a Neutral recommendation on Abbott, which carries a Zacks #3 Rank (Hold). Right now, Allergan, Inc.
(AGN - Free Report
) looks attractive with a Zacks #2 Rank (Buy).