Abbott and Alere aren't on the same page regarding the former's $5.8 billion acquisition of the latter. Abbott announced on Wednesday that it is auditing Alere, while the diagnostics maker--despite being under a federal investigation for its international sales practices--said it still expected the acquisition to close as planned.
Waltham, MA-based Alere's ($ALR) shares dropped as much as 2.1% on the Abbott ($ABT) announcement before stabilizing, indicating investors are less certain of the deal's close, Bloomberg reported Wednesday. This follows a string of actions on Abbott's part to get out of the transaction.
|Abbott CEO Miles White|
The acquisition was first announced in February. In March, a report showed that the U.S. Department of Justice has subpoenaed Alere over its dealings in Africa, Asia and Latin America. By April, Abbott was already getting cold feet, with CEO Miles White declining to affirm a commitment to the Alere buy on the Q1 earnings call.
Stressing concerns about the foreign corruption probe, Abbott tried to get out of the deal, offering Alere $50 million, which Alere rejected. If Abbott can't terminate the Alere deal, it could inherit the liability for the diagnostics maker's alleged misbehavior.
Also in April, the company announced a $25 billion deal to buy St. Jude Medical ($STJ). Credit rating agency Moody's is skeptical that Abbott can pull off both transactions without assuming too much debt, so it threatened to downgrade the company's rating if it went through with them.
Abbott has a record of snatching up innovative device companies and startups to supplement its revenue, including ablation catheter sheath maker Kalila Medical, and mitral valve replacement makers Tendyne and Cephea Valve Technologies. It entered catheter-based electrophysiology by acquiring two NEA startups, including Topera for $250 million, and participating in a venture round for VytronUS. It initially said it wasn't interested in St. Jude, but changed its tune this year and is now looking at two of the largest M&A deals in history.
While an Alere acquisition would boost Abbott's point-of-care diagnostics offerings, the St. Jude deal would help Abbott expand in the cardiovascular and neuromodulation markets. Abbott has been on the prowl for deals since it spun out AbbVie ($ABBV), which took with it R&D-driven therapeutics, leaving Abbott with diagnostics, nutrition, established pharmaceuticals and medical devices.
- here's the Bloomberg story