Abbott and Alere, after lawsuits, agree to merge in $5.3bn deal

June 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

June 2017 Issue

Following a series of lawsuits and accusations, US healthcare companies Abbott Laboratories and Alere Inc. have announced that they are to amend the existing terms of their agreement for Abbott to acquire Alere – a deal first announced in February 2016.

Under the amended terms, Abbott will pay $51 per common share to acquire Alere, for a new expected equity value of approximately $5.3bn, a drop from the originally expected equity value of approximately $5.8bn. Furthermore, the date by which necessary regulatory approvals must be received has been extended from 30 April to 30 September 2017.

The two companies have also agreed to dismiss their respective lawsuits.

Designed to expand Abbott’s global diagnostics presence and leadership, the 2016 definitive agreement for Abbot to acquire Alere (the global leader in point of care diagnostics), quickly became mired in accusations and counteraccusations, with Alere bearing the source of a number of negative developments. These included the elimination of billing privileges at Alere’s diabetes unit, a product recall, government inquiries and the late filing of its 2015 financial results.

In contrast, Abbot agreed to buy medical device maker St. Jude Medical for $25bn in April 2016, a deal which significantly added to Abbot’s heart and neurological devices business. As a global healthcare company devoted to improving life through the development of products and technologies, Abbot’s portfolio includes leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals. The firm, headquartered in Chicago, Illinois, operates in more than 150 countries and employs approximately 94,000 people.

In an attempt to terminate the Alere deal, Abbott filed a complaint in court in December 2016, citing a “substantial loss” in the value of the diagnostics company in the months since the deal had originally been struck. In response, Alere won court approval for Abbot to divulge communications between regulators and Abbot concerning antitrust approval for the merger. This action was in addition to a lawsuit filed by Alere earlier in the year, which was intended to push the deal forward.

So, with Abbot unable to extricate itself, the deal has now gone ahead, but at a lower price.

Speaking at the time of the initial merger negotiations, Miles D. White, chairman and chief executive of Abbott, said that the combination of Alere and Abbott would create the world’s premier point of care testing business and significantly strengthen and grow Abbott’s diagnostics presence. “We want to offer our customers the best and broadest diagnostics solutions. Alere helps us do that,” said Mr White.

One of these solutions is Point of Care Testing (POCT), a $5.5bn segment and one of the fastest growing in vitro diagnostics segments. The success of POCT is largely being put down to the increasing reliance that healthcare systems are placing on technologies to inform patient care decisions, because of their ease of use, speed and accuracy.

Headquartered in Waltham, Massachusetts, Alere believes in the immediate diagnosis and monitoring of health conditions. To achieve this, the company delivers reliable and actionable information by providing rapid diagnostic tests, enhancing clinical and economic healthcare outcomes globally. Alere also focuses on rapid diagnostics for cardiometabolic disease, infectious disease and toxicology.

The Abbot/Alere transaction is expected to close by the end of the third quarter of 2017, subject to the approval of Alere shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

“We believe this is an equitable settlement,” said Abbot spokesman Scott Stoffel following the announcement of the amended deal terms. “Point of care is an attractive, growing segment with growth opportunities in both developed and emerging markets. Our core strategic intent – to build a leadership position in this segment – remains the same.”

Fraser Tennant