US-based pharmaceuticals and health care products firm Abbott has signed a definitive agreement to acquire medical device company St Jude Medical for $25bn.

Under the agreement, St. Jude Medical shareholders will receive $85 per share of Abbott common stock with $46.75 in cash.

The acquisition is projected to add 21 cents next year and 29 cents in 2018 to Abbott’s adjusted earnings per share.

"This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organisation."

A net debt of approximately $5.7bn of St. Jude Medical will be assumed or refinanced by Abbott and it plans to fund the cash portion of this transaction with medium and long term debt.

Approved by the board of directors of St. Jude Medical and Abbott and subject to approval of St. Jude Medical shareholders and the satisfaction of customary closing conditions, including specified regulatory approvals, the acquisition is expected to be completed at the end of this year.

St Jude Medical develops and manufactures heart failure devices, atrial fibrillation and cardiac rhythm management which will add to Abbott’s existing portfolio in coronary intervention and transcatheter mitral repair.

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The combination of the companies is expected to explore ways to assist patients in restoring their health while reducing costs for payors and delivering value to the customers.

St. Jude Medical president and CEO Michael Rousseau said: "Our combined scale will expand the global reach, competitiveness and impact of our medical device innovation for physicians and hospitals.

"This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organisation."

The acquisition will be served by Evercore as the lead financial advisor for Abbott and Wachtell, Lipton, Rosen & Katz as the legal counsel.

BofA Merrill Lynch will provide financing and is also serving as the financial advisor to Abbott.

St. Jude Medical will be served by Guggenheim Securities as the financial advisor with Dunn & Crutcher serving as the legal counsel.