Resumo

Although it is not a new phenomenon, the spin-off is a new pharma business trend. This strategy was applied by the centenary Abbott to originate Hospira in 2004 and AbbVie in 2013. While the former could be considered as traditional restructuring to focus on core business, the latter Abbott’s spin-off is the largest separation transaction ever in the healthcare sector. In our exploratory longitudinal research, through secondary data, we analyzed and identified the circumstances and determinants for Abbott’s spin-off decisions as well as the consequences for parent and spun-off firms.

In our exploratory longitudinal research, through secondary data, we intended to analyze these two spin-off decisions with special attention to the AbbVie spin-off and answer the following questions: (i) what were the circumstances for Abbott’s decisions? (ii) what were the determinants for spin-off decisions? (iii) what were the consequences for Abbott (parent company) and the spin-offs (Hospira and AbbVie)?

A spin-off is an event that occurs when a company distributes its own common shares to a controlled subsidiary, creating a separate public company (Miles & Rosenfeld, 1983) whose motivation is not an immediate cash generation (Desai & Jain, 1999). Basically, there are four main reasons to choose spin-off: (i) to increase focus on the core business; (ii) to facilitate the company’s evaluation for analysts and investors; (iii) to remove unwanted business; and (iv) to improve the alignment of spin-off firm manager’s incentive compensations with stock market performance (Bennett & Feldman, 2017)

Hospira’s spin-off reduced diversification to allow Abbott to focus on the recent Knoll integration and prepare the company to launch Humira seemed logical, but AbbVie’s spin-off is less obvious. Abbott’s heart was pharmaceuticals, the most profitable margin in the healthcare sector. But considering Abbott’s diversified nature, this division’s operating way was different from others. This split led to growth opportunities through acquisitions or agreements for both companies. Abbott was valued at $100bn, and nine and half years later, Abbott and AbbVie are valued together at more than $457bn.

When Hospira was created its market value was about $4.2bn, and Pfizer bought it for $17bn. With AbbVie was no different: its initial market value of $57.8bn became, nine and half years later, $266bn. Meanwhile, at the time of the first spin-off, the parent company Abbott had a market value of $60.9bn. When the Hospira spin-off was consolidated, its market value was $66bn and dropout to $52.5bn due to the split of its shares with AbbVie. Currently, Abbott’s market value is more than tripled to $191bn. Therefore, Hospira’s and AbbVie’s spin-offs could be considered as well succeeded.

Bennett, V. M., & Feldman, E. R. (2017). Make Room! Make Room! A Note on Sequential Spinoffs and Acquisitions. Strategy Science, 2(2), 100–110. Desai, H., & Jain, P. C. (1999). Firm performance and focus: Long-run stock market performance following spinoffs. Journal of Financial Economics, 54(1), 75–101. Miles, J. A., & Rosenfeld, J. D. (1983). The Effect of Voluntary Spin-off Announcements on Shareholder Wealth. The Journal of Finance, 38(5), 1597–1606. Sierra, M. (2012). Abbott markets $14.5 billion for spinoff - Reuters. https://www.reuters.com/article/us-abbott-package-idUSBRE85J1EP20120