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Zoetis expands into veterinary diagnostics arena by acquiring Abaxis

Zoetis Inc. (ZTS), a former subsidiary of Pfizer (PFE), has agreed to acquire Abaxis Inc. (ABAX) for close to $2 billion as the former looks to expand into the area of veterinary diagnostics which has a vast scope compared to animal health. The $83 a share deal, which will be funded through a combination of cash and debt, is expected to add to Zoetis’ earnings in 2019 and be complete before the end of this year.

Abaxis is based in California and provides veterinary diagnostics and consumables products. Zoetis currently holds a small share in diagnostics in terms of revenue, and the deal makes sense as the market for veterinary diagnostics is estimated to grow to more than $3 billion over the next four years. This buyout unfolds many opportunities for the New Jersey-based company, which is facing strong competition in its current space.

The deal is expected to add to Zoetis’ earnings in 2019

The purchase price reflects a 15% premium over Abaxis’ share price at Tuesday market close and values the company at around $2 billion. Abaxis has a strong international presence as well as a product portfolio that will help create fresh revenue sources for Zoetis. A major portion of Abaxis’ sales come from its veterinary diagnostics business. An expansion into international markets will prove beneficial for Zoetis.

The news sent Abaxis shares soaring in early market hours by more than 15%. Consolidation is happening in every industry and animal health is no different. Last year, Zoetis acquired Ireland-based Nexvet, a biologics therapeutics company for $85 million.

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