Abbott Laboratories (ABT) has announcedthat it will split in two by the end of 2012. One half will be a diversified medical products company, while the other will be a research-based pharmaceutical companies. Are the two halves worth more than the whole to investors? And if you buy the company, what is the strategy after the division? Do you keep one half and sell the other?

When a company spins off one of its parts, it is sometimes to capture a perceived market value in the spin-out that was not being realized when it was part of the whole, for example, when some pearl of a high-tech company is locked into a stodgy oyster of a consumer products company. Other times, it is because management has decided that one part of the company no longer fits into the company’s overall strategic direction. Or maybe it’s because one half of the management can’t get along with the other. In the case of Abbott, the reason for the schism is not all that clear, but it is going be a pretty even split. One of the two will be a diversified medical products company that will keep the Abbott name and about $22 in annual revenue ,and the other will be $18 billion pharmaceutical business, to be called Abbvie. Hopefully the company will think of a better name before the final separation.

The split will take place via a tax-free distribution to Abbott shareholders of publicly-tradable stock in the new company.To continue reading, click here.