Abbott Plans to Spin Off $8.5 Billion Nutrition Business

Abbott plans to separate its Nutrition business, maker of Similac, PediaSure, Pedialyte, Glucerna and Ensure, into an independent, publicly traded company, the company announced on Oct. 21 alongside its third-quarter results.

The Nutrition business has approximately $8.5 billion in annual sales, about 16,000 employees and 14 manufacturing sites, according to Abbott. After the separation, Abbott would have sales of approximately $42 billion from its medical devices, diagnostics and established pharmaceuticals businesses.

How the separation would work

Abbott intends to distribute shares of the new Nutrition company to its shareholders, who would then own stock in both companies. The transaction is intended to qualify as tax-free for U.S. federal income tax purposes. Abbott said it expects the combined dividend paid by the two companies to equal Abbott's dividend at the time of separation.

The company expects to complete the separation by the end of 2027, subject to conditions including regulatory approvals, the effectiveness of a Form 10 registration statement and final approval by Abbott's board. It expects one-time charges related to the transaction, to be quantified later. Abbott said the plan will not change its 2026 guidance or the 2027 guidance it plans to issue in January.

Daniel Salvadori, executive vice president and group president of Established Pharmaceuticals and Nutritional Products, will become CEO of the Nutrition company. Goldman Sachs is Abbott's financial advisor and Wachtell, Lipton, Rosen & Katz its legal counsel.

"As we continue to shape Abbott for the future, this separation will benefit both companies, setting each one up for maximum success in its respective market," said Robert B. Ford, Abbott's chairman and CEO. He said the remaining "higher-growth, innovation-driven portfolio of medical devices, diagnostics and established medicines has compelling growth opportunities."

Third-quarter results

Abbott reported third-quarter sales of $13.01 billion, up 14.5% on a reported basis and 7.0% on a comparable basis, which includes the prior-year sales of Exact Sciences, the cancer diagnostics company Abbott acquired in March. Medical devices sales were $5.83 billion, up 6.9% reported. Nutrition sales were $2.26 billion, up 5.1% reported, though nutrition sales for the first nine months of the year were down 1.3% on a reported basis.

GAAP diluted earnings were $0.53 per share and adjusted diluted earnings were $1.42 per share. Abbott projected full-year comparable sales growth of approximately 6.0% and narrowed its full-year adjusted EPS guidance to $5.50 to $5.55, reaffirming the midpoint of its previous range.

Analyst and industry context

Abbott is the latest large medtech company to pursue a spinout, following Medtronic's separation of its diabetes business earlier this year and Johnson & Johnson's planned orthopaedics spinout, MedTech Dive reported.

J.P. Morgan analyst Robbie Marcus wrote that the separation "should improve top-line growth and margins," according to MedTech Dive. BTIG analyst Marie Thibault noted that the nutrition business had sometimes weighed on sales growth, that its margins are below the corporate average, and that "liabilities tied to infant formula litigation remain an overhang."

MedTech Dive also noted that in September Abbott announced a $385 million settlement with the Department of Justice to resolve claims tied to its 2022 powdered infant formula recall; Abbott said the settlement does not represent a finding of fault or liability. The Nutrition business will continue to operate as part of Abbott throughout the separation process.