M&A

Abbott Files Suit to Terminate Alere Merger

“Alere is no longer the company Abbott agreed to buy 10 months ago," Abbott says, citing negative developments since the deal was announced.
Matthew HellerDecember 8, 2016
Abbott Files Suit to Terminate Alere Merger

In the latest twist in a proposed $5.8 billion healthcare merger, Abbott has filed suit to terminate its acquisition of Alere, citing “numerous negative developments” since the deal was announced.

Alere’s recent setbacks have included federal investigations of its billing and marketing practices, a suspension by the federal government of the billing privileges of an Alere unit, and a product recall. The diagnostics company had agreed in January to be acquired by Abbott.

On Wednesday, Abbott moved to abort the agreement through a lawsuit filed in Delaware Chancery Court.

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“Alere is no longer the company Abbott agreed to buy 10 months ago,” spokesman Scott Stoffel said in a news release, adding that the “numerous negative developments” were “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,” he said. “This damage to Alere’s business can only be the result of a systemic failure of internal controls, which combined with combined with the lack of transparency, led us to filing this complaint.”

A clause in the merger agreement allows Abbott to terminate the deal “if adverse events materially change Alere’s long-term prospects.”

But Alere, which filed its own suit in August accusing Abbott of trying to sabotage the deal, said the complaint had no merit and it was still confident the merger will be completed.

“As Abbott well knows, none of the issues it has raised provides it with any grounds to avoid closing the merger,” Alere stated in a news release.

Analysts said the termination suit may be a ploy by Abbott to get a better deal. “This is likely posturing by Abbott to set up a scenario where a price cut could be arranged,” Canaccord Genuity’s Mark Massaro told Reuters.

The New York Times noted that when a buyer invokes a “material adverse change” clause, the seller may settle at a lower price to “avoid litigation and an adverse decision resulting in no deal at all.” The buyer, meanwhile, “also does not want to lose litigation and be stuck buying a company at the original price.”