Abbott Labs Breakup and Moat

Abbot Labs (ABT) announced earlier that it is splitting up into two companies. It will spin off its proprietary drug business by the end of 2012 and retain the rest of its businesses under the Abbott name. At $82 Billion in market value, Abbott is too large of a company to attract my interest, but whenever a spin off is announced, I certainly keep a watch to make sure that I am able to capitalize on any discounts to real value that may appear.

Today, the folks at Morningstar did some preliminary analysis on their estimate of the intrinsic value of the 2 entities along with their conclusions on the moat inherent in these 2 companies. If you are interested in Abbott Labs, medical devices or pharmaceutical stocks, you may want to read this article.

From my perspective, a moat is definitely good but is useless if I am not able to acquire shares at a reasonable price. So the opportunity needs to be seen when the spin off is completed. Please note that Morningstar’s estimate is certainly not the final word on the valuation and the company will release more data in the coming months that will give us a better picture of the value and financials of the two separate entities.

So we will wait and see.

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