Abbott Laboratories ( ABT) agreed to acquire Therasense ( THER) for $27 a share in cash, or more than 100 times expected 2004 earnings for a company that makes blood-glucose test kits.

TheraSense, based in Alameda, Calif., makes and sells the FreeStyle blood glucose self-monitoring kit, and specializes in diabetes test systems that use small blood samples to produce rapid test results.

The $27 buyout price -- which comes out to $1.12 billion -- is a big premium to Therasense's Monday close of $20.30 and its 52-week high of $21.48. It's also more than five times the company's trailing 12-month revenue of about $196 million, although that revenue is growing at a roughly 150% rate. Therasense isn't currently profitable, but analysts expect it to earn 26 cents a share next year.

Therasense was recently up $6.40, or 31.5%, to $26.70 in Instinet premarket trading.

"Together with TheraSense, Abbott can build on its success in the blood glucose monitoring business," Abbott said in a release. "We will continue to promote both the MediSense and TheraSense products and brands. This transaction will allow us to better serve the needs of people with diabetes through advanced technology, a promising pipeline, a broader product line, and critical mass in research, development, sales and marketing."

Abbott expects the acquisition to dilute earnings by 1 cent a share in 2004 and turn accretive thereafter. It will also result in "one-time charges" in the second quarter, primarily for in-process research and development, and "throughout 2004 for integration expenses."

The transaction is also subject to approval by holders of a majority of TheraSense common stock at a special meeting of stockholders; regulatory approvals; and other closing conditions. The deal is expected to close in the second quarter of 2004.

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