Abbott Laboratories Announces Spin Off of its Pharmaceutical Unit – Stock Rises

October 20 00:00 2011

New York, October 20 ( – Abbott Laboratories (NYSE: ABT) plans to spin off its $18 billion pharmaceuticals arm under a new name and split itself into two. The announcement by the company this morning will make investors in other pharmaceutical companies jittery about their investments because pharmaceuticals will appear to be a lot less appealing as a safe investment.

The pharmaceutical spin off will be headed by pharmaceutical chief Richard Gonzales and the rest of the company’s business will be run by chief executive Miles White. The area of business under his charge includes medical devices used in heart procedures and Similac baby formula and generates $22 billion in annual sales.

Abbott shares went up 5% to $55 which is close to its 52-week high, as investors approved the plan. Some investors and analysts at investment banks have been suggesting that Abbott should break up itself up and Jami Rubin, who covers pharmaceuticals at Goldman Sachs, had predicted some time back that three big medical companies would split.

She had written that Abbott would be worth $60 per share if it broke up compared to $46 when the note was written. She said in the note that “[Abbott] does not appear to be getting credit for its diversified structure and trades more in line with a lower-multiple drug company.”