How Will Abbott Laboratories Benefit from Its Alere Acquisition?



Alere acquisition developments

On April 14, 2017, Abbott Laboratories (ABT) agreed to acquire point-of-care diagnostics player Alere (ALR) for an equity value of ~$5.3 billion, ~$500 million lower than the price decided for Alere on January 31, 2016.

The existing terms of the agreement had to be amended after multiple regulatory and legal issues related to Alere were discovered following the original announcement of the acquisition.

In accordance with the new agreement, all regulatory approvals related to this transaction have to be secured by September 30, 2017. The deal is expected to be completed in 3Q17.

In the event point-of-care diagnostics prove to be attractive for Abbott Laboratories in 2017, the company’s stock could see a favorable impact, as could the price of the iShares Core S&P 500 ETF (IVV). Abbott Laboratories makes up ~0.36% of IVV’s total portfolio holdings.

Issues related to the Abbott-Alere deal

The above diagram gives a snapshot of the various adverse developments that materialized for Alere after announcement of the Abbott-Alere deal in 2016. These circumstances led to Abbott Laboratories’ filing a complaint with the Delaware Court of Chancery asking for the termination of the agreement. Abbott also claimed that Alere had breached certain covenants in the agreement. To know more about these adverse developments with Alere, read A Deep Dive into the Developments at Alere.

The recent amended agreement ended the long legal battle between the two companies. Abbott Laboratories currently plans to use a combination of cash and equity to fund this transaction, which has been valued at $51 per Alere share.

With Alere’s robust point-of-care diagnostics portfolio, Abbott Laboratories is expected to pose tough competition to other medical device players such as Medtronic (MDT), Thermo Fisher Scientific (TMO), and Boston Scientific (BSX).

In the next article, we’ll discuss some developments in the Abbott–St. Jude Medical deal.

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