NEW YORK (TheStreet) -- Shares of Abbott Laboratories (ABT) are up 1.84% to $42.06 after Mylan (MYL) said it would buy Abbott's specialty and branded generics business in developed markets outside the U.S. in an all-stock transaction valued at about $5.3 billion, Reuters reports.
The deal has also been structured to help Mylan reduce its tax bill by moving its tax address outside the U.S., a practice known as tax inversion that has become popular among healthcare companies, Reuters noted.
Under the deal, Abbott will transfer the assets to a new public company organized in the Netherlands, after which Mylan will merge with a wholly owned unit of the new company, Reuters said.
Abbott will receive 105 million shares of the combined company, giving it about 21% ownership stake.
Shares of Mylan are higher by 2.99% to $51.70.
TheStreet Ratings team rates ABBOTT LABORATORIES as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABBOTT LABORATORIES (ABT) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
- ABBOTT LABORATORIES's earnings per share declined by 35.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ABBOTT LABORATORIES increased its bottom line by earning $1.50 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($2.20 versus $1.50).
- The gross profit margin for ABBOTT LABORATORIES is rather high; currently it is at 57.53%. Regardless of ABT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.15% trails the industry average.
- Net operating cash flow has decreased to $336.00 million or 26.99% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Health Care Equipment & Supplies industry. The net income has significantly decreased by 31.1% when compared to the same quarter one year ago, falling from $544.66 million to $375.00 million.
- You can view the full analysis from the report here: ABT Ratings Report