Wall Street’s view
The merger deal between Abbott Laboratories (ABT) and Alere (ALR) has become an extended battle, and Wall Street analysts have been closely watching the ongoing developments in this deal. Some analysts believe that Abbott still can gain value from Alere if the deal goes through, but at a more reasonable price than what was identified in February 2016.
The Abbott–Alere deal synergies could still be beneficial to Abbott Laboratories due to the company’s leading market position in several business areas.
According to Canaccord Genuity analyst Mark Massaro, “This is likely posturing by Abbott to set up a scenario where a price cut could be arranged.” Massaro believed that Abbott could benefit from any uncertainty surrounding Alere stock, and that a lower price could be acceptable to the company’s shareholders.
According to Jefferies’s analyst Raj Denhoy, “It is still a good asset for Abbott. One would think that cooler heads should prevail, but we’re not in the boardroom.”
Other views in the market
The damaging developments at Alere (ALR) could constitute a materially adverse effect, which could lead to the termination of the agreement. In that case, the Abbott Laboratories–Alere deal would be terminated.
Historically, however, such deals have been mostly completed with a price settlement. Notably, this could be the first such deal to be terminated in the Delaware Court of Chancery due to material changes in the target company.
According to Roger Strode, a partner at Chicago’s law firm Foley & Lardner, “Not everybody has the same definition of what a clause means. A lot of times these clauses are such that they can lead to a lot of arguing and a lot of interpretation about whether you fit the definition of what’s a material adverse effect or a material adverse change.”
For diversified exposure to Abbott Laboratories and its peers, investors can consider the Vanguard Dividend Appreciation ETF (VIG). VIG holds approximately 1.3%, 3.5%, and 2.6% of its holdings in Abbott Laboratories, Johnson & Johnson (JNJ), and Medtronic (MDT), respectively.
In the final part of this series, we’ll look at Alere’s response to Abbott Laboratories’s lawsuit.