Zoetis expects the diagnostics category which currently accounts for a small share of its more than $5 billion in annual revenue to grow faster than the animal health-care industry.
The veterinary diagnostics market worldwide is expected grow to $3.62 billion in 2022 from $2.31 billion in 2017, according to research firm MarketsandMarkets.
Abaxis should also help New Jersey-based Zoetis lower its reliance on its large animal dermatology business that faces looming competition from smaller firms.
Shares of Abaxis jumped about 15 percent to $82.75 in premarket trading on Wednesday, just shy of Zoetis' all-cash offer price of $83 per Abaxis share. The stock has surged 45 percent since the start of the year.
Zoetis will fund the deal through cash and new debt. It expects the deal to close before the end of the year and Abaxis to add to its earnings in 2019.
Abaxis provides tools and services that detect, prevent and treat animal diseases.
Guggenheim Securities and Barclays were Zoetis' financial advisers, while Piper Jaffray advised Abaxis.