UPDATED: Abbott inks $5.8B deal for Alere to expand in point-of-care diagnostics

Abbott CEO Miles White

Over the summer, Abbott ($ABT) said that it was keeping an eye out for potential deals, even if it didn't want one with St. Jude ($STJ). Now, the company has landed on its next purchase, snatching up diagnostics outfit Alere ($ALR) to bulk up in point-of-care diagnostics and expand its international reach.

Illinois-based Abbott will shell out $56 per common share for Alere, and expects the deal to ring in at about $5.8 billion. Alere will become an Abbott subsidiary, and Abbott will take on Alere's net debt of about $2.6 billion. Once everything is signed and sealed, Abbott sees its diagnostic sales surpassing $7 billion, the company said in a statement.

"The combination of Alere and Abbott will create the world's premier point of care testing business and significantly strengthen and grow Abbott's diagnostics presence," Abbott CEO Miles White said in a statement. "We want to offer our customers the best and broadest diagnostics solutions. Alere helps us do that."

A deal between the companies will create the "broadest point of care menu" including products for infectious disease, molecular, cardiometabolic and toxicology testing, and will also hand Abbott tools such as benchtop and rapid strip tests, the company said. Abbott expects the deal to be immediately accretive to its ongoing earnings and significantly accretive later on, resulting in annual pre-tax synergies of about $500 million by 2019.

Namal Nawana, Alere CEO

The deal also allows Abbott to harness Alere's international presence to chart progress. More than half of Alere's $2.5 billion sales are in the U.S., but the company also has a growing presence in certain international markets that could give Abbott a boost further down the line. "Our leading platforms and global presence in point-of-care diagnostics, combined with Abbott's broad portfolio of market-leading products, will accelerate our shared goal of improving patient care," Alere CEO Namal Nawana said in a statement.

Each company's board of directors has already signed off on the deal. Now Abbott and Alere are waiting for approval from shareholders and regulators.

Analysts do not "envision a topping bidder nor meaningful regulatory challenges" that would impede the deal's close, Leerink analyst Dan Leonard said in a note to clients. The companies' revenue does not have much overlap, Leonard pointed out. And Alere's business in China, which some see a potential regulatory hurdle, was "minimal," he added. Analysts expect the deal to close by the end of the year. 

An Alere buyout comes at a pivotal time for Abbott. Over the summer, analysts wondered who the company would buy next after it said that it wasn't interested in a deal with St. Jude. Wells Fargo analyst Larry Biegelsen said in August that he expected Abbott to make one midsized, $5 billion to $7 billion deal in the following months that would play into the company's strategy of focusing "on differentiated technologies and platforms that can drive top-line growth." Alere's rapid diagnostics and diverse infectious disease tests could fit the bill.

A deal also comes at a transitional moment for Alere. Back in July, the company made some M&A moves, selling its BBI Diagnostics business to U.K. private equity firm Exponent Private Equity for $164 million and scooping up "substantially all" of drug-testing outfit US Diagnostics for $60 million. Alere was struggling to bounce back from slumping revenues and lingering debt, and the deals were meant to strengthen "our core business areas and our balance sheet," Nawana said at the time.

- read the statement