Abbott Laboratories is expanding its position as a major player in eye care after the firm announced that it is acquiring Allergan spin-off Advanced Medical Optics in a deal valued at $2.8 billion.

Under the terms of the deal, Abbott will initiate a tender offer by January 26 to purchase all of AMO's outstanding shares at $22 per share in cash, which related to around $1.36 billion. It is also taking on the Santa Ana, California-based firm’s debts, hence the $2.8 billion figure.

AMO specialises in cataract surgery, laser vision correction (LASIK), and eye care products and Abbott noted that globally, it holds the number one position in LASIK surgical devices and is ranked second in the cataract surgical device market. AMO holds the number three position in contact lens care products and Abbott said that “adding an established global leader in ophthalmic care will provide long-term sustainable growth platform with more than $1 billion in annual sales”.

Miles White, chief executive at the US major, said that through the AMO deal, “Abbott is enhancing and strengthening its diverse mix of medical device businesses and gaining a leadership position in another large and growing segment". He added that the firm’s “significant global presence will help drive growth opportunities for this business, especially in international markets, where favourable demographics are driving demand for advanced eye care procedures and products."

Abbott noted that 60% of people older than 60 have cataracts, which are the leading cause of vision loss among this age group. It is estimated that 700 million people globally are 60 or older, and that number is expected to grow to one billion over the next decade.

Unsurprisingly, AMO shares shot up as the deal was announced, climbing nearly 143% to $21.50.

Abbott expects the transaction to be neutral to earnings per share in 2009, and accretive in 2010. The company also reiterated its 2008 earnings per share guidance of $3.31-$3.33, and said that profits are expected to be in the range of $3.65-$3.70.

The AMO deal is the latest example of a drugmaker looking at other areas to grow their businesses as drugs come under increased pricing pressures and face patent cliffs. Last year, Novartis said it would buy up to a 77% stake in Alcon, the eye care market leader, from Nestle in a two-step transaction that could be worth as much as $39 billion.