Abbott agreed to sell two diagnostic units to General Electric for $8.13 billion because the business has gotten too big for the company, Abbott Chairman and CEO Miles White told CNBC.
"It's evolved now to a different kind of laboratory business than what I grew up in at Abbott 20 years ago," Miles said on "Squawk Box." "Frankly, going forward this market's going to continue to consolidate on these large mainframe systems. GE's got all the skills necessary for that kind of market and we don't."
GE , the parent of CNBC, will acquire Abbott's primary in-vitro diagnostics businesses and point-of-care diagnostics business. Abbott's molecular diagnostics and diabetes care businesses are not part of the transaction and will remain part of Abbott. The deal is expected to close in the first half of 2007.
In a statement, GE Chairman and CEO Jeffrey R. Immelt, said: "This acquisition is consistent
with GE's strategy to invest in high-technology global infrastructure businesses that deliver strong top-line growth, earnings expansion and expanded margins."
In a conference call with investors late Thursday afternoon, White said the sale will yield $6 billion in after-tax cash. Abbott plans to use the money primarily to pay down debt and supplement share repurchases, he said. Abbott continues to be interested in acquisitions, but "the fact is nothing is active on our radar screens," White said.
Abbott's in vitro diagnostic division tests blood and urine samples to diagnose diseases and other conditions. GE's primary health care business is manufacturing diagnostic equipment, including ultrasound and X-ray machines and screening equipment. The company entered the molecular diagnostic market when it paid more than $9 billion in 2004 for Britain's Amersham, a bioscience and medical diagnostic firm.
GE is developing molecular agents that target specific diseases when they are injected into the blood stream. The agents show up during screenings indicating that a patient has a particular cancer or disease.
Diagnostics related to breast cancer has been a key focus of GE.
In the last several months, GE has been selling off slower-growth businesses such as insurance and plastics and focusing on faster-growth areas such as energy, oil and gas equipment, rail engines, health care technology, finance and water processing technology.