Abbott Laboratories' (ABT) deal for Advanced Medical Optics Inc. (EYE), along with other smaller ones, shows there's an appetite for healthcare mergers - but so far companies are only willing to bite off what they can easily chew.

"I think you're going to see companies be pretty aggressive, and what they're going to be aggressive in acquiring is what they can afford," said Jan Wald, an analyst with Stanford Group.

Many healthcare giants have lots of cash and see a landscape of possible takeover targets with financial needs and low valuations. The opportunity is there for the potential acquirers to enter new lines of businesses or help improve underperforming assets.

In Abbott's case, the purchase of Advanced Medical for nearly $1.36 billion, excluding debt, further diversifies the already diversified medical company by giving it a vision business for the first time. Similarly, health giant Johnson & Johnson (JNJ), which is often viewed as a model for Abbott, did a $1.07 billion deal recently to get into the cosmetic-surgery business.

Both deals were done with cash and could easily be handled by the much larger companies. Abbott's market cap is $78 billion, while J&J is above $162 billion.

Overall, the norm in healthcare lately appears to be manageable deals, such as Medtronic Inc.'s (MDT) agreement Monday to buy a private heart-device company for $225 million plus future milestone payments.

Joanne Wuensch, a BMO Capital Markets analyst, said it's part of the "new M&A paradigm." In other words, "companies with cash shopping for beaten-up franchises which could be leveraged in an economic recovery."

Big pharmaceutical companies are said to be on the prowl for deals this year. Cash-rich drug makers such as Merck & Co. Inc. (MRK) and Pfizer Inc. (PFE) have signaled they're looking for biotechnology companies, particularly those suffering in the current economic environment. Big pharma's goal is to add new growth platforms amid worries about current drugs losing patent protection.

Several drug-makers are also taking steps to diversify their businesses and lessen their reliance on the U.S. market for traditional prescription drugs. Wyeth (WYE), for example, is in talks to acquire Dutch vaccines maker Crucell NV (CRXL), Crucell disclosed last week.

In Abbott's case, Chairman and Chief Executive Miles D. White signaled last summer that he was interested in building up the non-pharmaceutical side of Abbott's business, including medical devices and nutritionals. He has a history of swinging big deals at Abbott, including the 2006 purchases of Guidant Corp.'s vascular business and drug-maker Kos Pharmaceuticals.

Abbott also spun off hospital products-maker Hospira Inc. (HSP) in 2004 under White's watch.

The latest deal "helps to continue the diversifications strategy Miles created years ago," said John M. Capek, Abbott's executive vice president of medical devices, in an interview.

Under the deal, Abbott will pay Advanced Medical Optics $22 a share, a huge premium compared with Advanced Medical's closing price Friday of $8.85 but actually a discount to where Advanced Medical was trading last fall.

JPMorgan analyst Michael Weinstein said Abbott is a company "taking advantage of its financial strength to pursue beaten-down targets, this time in a new therapeutic area."

J&J similarly acted recently to buy recession-addled Mentor Corp. (MNT), which makes breast implants.

Advanced Medical shares leapt on the deal news and were recently up $12.74 to $21.59. Shares had been battered previously by a sharp downturn in laser procedures to improve eyesight - the company is the top maker of equipment for the so-called Lasik market.

Abbott shares fell 1.4% to $50.45.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

(Peter Loftus contributed to this report.)

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