Abbott files suit to terminate $5.8 billion purchase of Alere
Abbott Laboratories filed suit to terminate its $5.8 billion purchase of Alere Inc., citing setbacks since the deal was signed in January that the Libertyville Township-based company says have significantly eroded the value of the medical-test maker.
The acquisition was troubled almost from the start. In February, Alere disclosed a delay in filing its financial results with securities regulators because of revenue recognition problems in China and Africa. It marked the beginning of a drumbeat of bad news as the company said it received subpoenas from the U.S. regarding bribery investigations and billing practices, restated earnings, pulled a product off the market and had its diabetes division excluded from the Medicare health insurance program after billing for patients who had already died.
The complaint, filed Wednesday in Delaware Chancery Court, claims that Abbott has the right to terminate the transaction because the cumulative effect of the setbacks constitute a material change in Alere's prospects.
"Alere is no longer the company Abbott agreed to buy 10 months ago," Abbott spokesman Scott Stoffel said in a statement. "These numerous negative developments are unprecedented and are not isolated incidents brought on by chance."
Abbott's suit seeking to scuttle the merger is likely to be heard by Delaware Chancery Court Judge Sam Glasscock III, who has overseen earlier litigation concerning the deal.
In June, Glasscock concluded that Energy Transfer Equity LP could back out of a $33 billion merger with rival pipeline operator Williams Cos because of tax problems tied to the combination. Tulsa-based Williams is now suing Dallas-based Energy Transfer for more than $10 billion in damages. In response, Energy Transfer is seeking to force Williams to pay $1.5 billion in fees tied to the deal's failure.
After soaring close to the proposed purchase price of $56 a share in February when the deal was announced, Alere closed Tuesday at $39.86.
While Alere acknowledged challenges during the year, the Waltham, Massachusetts-based company said the setbacks didn't constitute a material change and insisted that the deal would close as originally agreed. In August, it sued to compel Abbott to pursue U.S. antitrust clearance and close the transaction, claiming Abbott was intentionally dragging its feet to derail the deal and focus on its pending $25 billion acquisition of St. Jude Medical Inc. The two sides were working with a mediator to settle the dispute.
Abbott filed its own suit in November, claiming that Alere violated terms of the agreement by hiding information relating to the bribery investigations, overseas operations and U.S. billing practices. While the two sides agreed to settle the suit, with Alere providing the documents, none have yet been provided, Stoffel said.
"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 the lack of transparency, led us to filing this complaint."