Abbott Labs Worth Less Than Its Spinoff

by Tom Taulli | December 11, 2012 10:44 am

Abbott Laboratories NYSE:ABT[1]Because of aggressive acquisitions over the years, Abbott Laboratories (NYSE:ABT[2]) has really become two companies — a drug operator and a diversified health care firm (with diagnostic systems, medical devices and nutritional products). So, to unlock more shareholder value, the company is in the process of a spinoff.

In fact, Wall Street is already making a big valuation adjustment[3]. The drug company — named AbbVie, which is being traded on a “when issued” basis — has a market cap of $55.3 billion, which actually is bigger than the parent company’s $47.9 billion.

Investors generally like to invest in companies that have a singular focus; it makes the analysis much easier and also means management has fewer distractions.

And yes, spinoffs often have been good for investors. A notable example is Marathon Oil (NYSE:MRO[4]), which spun off its refining division, Marathon Petroleum (NYSE:MPC[5]) back in June 2011. Since then, shares have ripped off 85% gains, making it one of the year’s top stocks to date[6].

Tom Taulli runs the InvestorPlace blog IPO Playbook[7], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[8]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[9].”  Follow him on Twitter at @ttaulli[10]. As of this writing, he did not hold a position in any of the aforementioned securities.

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  2. ABT:
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  6. one of the year’s top stocks to date:
  7. IPO Playbook:
  8. How to Create the Next Facebook:
  9. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders:
  10. @ttaulli:

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