Abbott seeks to terminate $5.8-bn acquisition of Alere
08 December 2016
Abbott Laboratories yesterday said that it had filed a complaint to terminate its proposed acquisition of Alere Inc due to a "substantial loss" in the value of the diagnostics company since the merger agreement was signed.
In February, Abbott agreed to buy Alere for $5.8 billion aimed at creating the world's premier point of care testing business to expand grow its presence in diagnostics. (See: Abbott to buy rapid diagnostic testing provider Alere for $5.8 bn) But Abbott has been hesitant to complete the transaction and tried to call the deal off in April by suggesting that Alere misrepresented while negotiating the merger agreement.
In April, Abbott, which is also in the process of buying medical device company St Jude Medical Inc for around $25 billion, had offered to pay Alere around $50 million as legal costs tied to the deal in order to terminate the transaction, but Alere's board rejected the offer.
After the deal was announced, the US Department of Justice served Alere two separate subpoenas based on its investigations into Alere's sales practices, and patient-billing records related to Medicare, Medicaid and Tricare. The company lost reimbursement on its Medicare business.
Alere also delayed filing its financial statements for six months and disclosed probes into billing and foreign sales practices.
In July, the US health regulator forced Alere to recall a device used to monitor levels of a widely used blood thinner because it was found to generate faulty results.
The following month, Alere sued Abbott to force it to obtain US antitrust approvals required to complete its acquisition. (See: Alere sues Abbott for completion of $5.8-bn merger) ''In the 10 months following the Jan. 30, 2016, signing of the agreement, Alere has suffered a series of damaging business developments, including the government eliminating the billing privileges of a substantial Alere division, the permanent recall of an important product platform, multiple new government subpoenas, including two new criminal subpoenas, and a five-month delay in filing its 10K coupled with admissions of internal control failures requiring restatement of its 2013-2015 financials,'' Abbott yesterday said in a statement.
"Alere is no longer the company Abbott agreed to buy 10 months ago," said Scott Stoffel, divisional vice president of external communications, Abbott. "These numerous negative developments are unprecedented and are not isolated incidents brought on by chance. We have attempted to secure details and information to assess these issues for months, and Alere has blocked every attempt. This damage to Alere's business can only be the result of a systemic failure of internal controls, which combined with the lack of transparency, led us to filing this complaint."
Abbott filed its complaint seeking termination in the Delaware Court of Chancery, citing these events among others as material adverse events.
Under terms of the merger agreement, Abbott may terminate the transaction if adverse events materially change Alere's long-term prospects.
With annual sales of $2.5 billion, Alere makes tests for infections such as HIV, tuberculosis, malaria and dengue.
Its tests, which are fast, easy-to-use and cost-effective, are focused on the areas of infectious disease, molecular, cardiometabolic and toxicology. The company has carried out more than 1.4 billion tests at the point of care in 2015.
Alere also develops simple, rapid tests, including Alere i, the first molecular CLIA-waived test for flu and strep, that provides results in under 15 minutes.
More than half of Alere's $2.5 billion in sales are generated in the US, and represents about 10 per cent of Abbott's total diagnostic sales of $4.6 billion last year.