GE's $8-bn Abbott deal is off

BOSTON/NEW YORK: General Electric and Abbott Laboratories cancelled GE’s proposed purchase of Abbott’s diagnostics units for $8.13 billion because they couldn’t agree on terms. GE, the world’s biggest maker of medical-imaging machines, would have acquired operations with $2.7 billion in annual sales and products such as devices that test blood proteins for heart disease. Abbott, the third-largest US drugmaker, wanted to increase its focus on its higher-profit pharmaceutical units.

The purchase would have helped drive GE chief executive officer Jeffrey Immelt’s strategy of increasing GE Healthcare’s sales of products for the early disease detection. “It’s good that they’re not buying this asset,” said Peter Bates, an analyst at T Rowe Price & Associates, which owned more than 143 million GE shares at the end of March among its $350 billion in assets. “It was a business in decline, and GE should be buying back their stock.”

Abbott now won’t sell the diagnostic operations, said spokeswoman Melissa Brotz. “We believe this remains a highly valuable business, and our intent is to manage it within Abbott,” Brotz said. GE spokesman Russell Wilkerson said Wednesday the company will discuss its plans for the cash it would have paid for the Abbott units on its earnings conference call July 13. He said the health-care division remains focused on early diagnosis and treatment of disease. The termination won’t affect GE’s 2007 profit forecast, Wilkerson said.

Abbott’s earnings forecasts for 2007 and 2008 also won’t be changed, the company said Wednesday. The decision to end the agreement was mutual the companies said. Abbott shares dropped 3.9% to $51.20 in trading after the close Wednesday, while GE rose 13 cents to $38.33.

The $6 billion Abbott would have netted after taxes from GE was to have helped pay off more than $9 billion in debt from Abbott’s acquisitions of Kos Pharmaceuticals and Guidant’s vascular division.