Abbott Labs Worth Less Than Its Spinoff

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

[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.

Endnotes:

[Image]: https://investorplace.com/wp-content/uploads/2012/07/AbbottPromo.jpg
ABT: http://studio-5.financialcontent.com/investplace/quote?Symbol=ABT
valuation adjustment: http://www.bloomberg.com/news/2012-12-10/abbott-spinoff-abbvie-begins-trading-to-determine-value.html
MRO: http://studio-5.financialcontent.com/investplace/quote?Symbol=MRO
MPC: http://studio-5.financialcontent.com/investplace/quote?Symbol=MPC
one of the year’s top stocks to date: http://slant.investorplace.com/2012/12/10-best-stocks-of-2012/
IPO Playbook: https://investorplace.com/ipo-playbook/
How to Create the Next Facebook: http://www.amazon.com/gp/product/1430246472/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=0GRB6ZMCTYDZVNG7Q7NV&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846
High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders: http://goo.gl/pR2F3
@ttaulli: https://twitter.com/ttaulli

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