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Abbott to acquire Alere for $5.8 billion

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(Credit: Tim Boyle/Getty Images) ABBOTT PARK, IL - FEBRUARY 10: Abbott Laboratories signage is visible on the campus of its headquarters February 10, 2004 in Abbott Park, Illinois. Abbott Laboratories has announced that it has received approval from the U.S. Food and Drug Administration (FDA) for 11 diagnostic assays for hepatitis, prostate specific antigen (PSA) and alpha-fetoprotein (AFP). Also, investigators in Illinois and New York, including Illinois Attorney General Lisa Madigan, are investigating the Abbott Park, Illinois-based health care company's pricing of their AIDS medicine Norvir after its cost increased nearly 400 percent. Abbott Laboratories, a global, diversified health care company devoted to the discovery, development, manufacture and marketing of pharmaceuticals, nutritionals, and medical products, including devices and diagnostics, employs more than 70,000 people, marketing its products in more than 130 countries. Illinois Drugmaker Under Investigation By State Attorney General
February 2
4:55 AM 2016

Abbott, a healthcare firm, said that it has signed a definitive deal to acquire Alere, a point-of-care diagnostics company. As part of the agreement, Abbott will pay a total value of $5.8 billion or $56 per common share to buy Alere. The transaction will make Abbott a spearhead in the point-of-care testing platform.

The company expects the acquisition to be immediately accretive to its earnings per share upon completion, with about 12 - 13 cents in 2017 and over 20 cents in 2018. The deal is expected to result in pre-tax collaborations nearing $500 million within 2019, including operational benefits and sales.

As per the terms of the pact, stockholders of Alere will get $56 per common share in cash and Alere will become a unit of Abbott. The healthcare firm said that it will refinance Alere's present net debt of $2.6 billion.

Following the close of the pact, the company's net diagnostics sales will top $7 billion, Abbott noted. Alere's integral set of products will enable Abbot to have access to fresh channels as wells as geographies. In addition, the transaction will favour Abbot's entry into the fast developing outlets like clinics, at-home testing, doctors' offices and medical stores.

Abbott said that the merged business will broaden its platforms to comprise quick strip tests. Miles D White, Abbott's chief executive officer and chairman, noted that the combination of Abbott and Alere will build the global leading point of care testing industry and also strengthen Abbott's presence in the diagnostics area.

The acquisition is subject to the consent of Alere's stockholders and other regulatory approvals. Abbott noted that Kirkland & Ellis LLP is acting as its legal counsel and Evercore as its financial advisor. While JP Morgan and Cravath, Swaine & Moore is acting as Alere's financial advisor and legal counsel respectively.

According to Bloomberg Gadfly, shares of Alere had taken a shot in the previous half of the year amid a trivial flu season in the US, a subpoena from the SEC and poor sales in Asia and Africa. Many analysts kept their buy ratings for Alere's shares, stating that the core business essentials of the firm remain attractive in spite of present challenges.

The worldwide point-of-care diagnostics market is expected to develop an average of 9.3% per year, to reach $27.5 billion within 2018, Chicago Tribune said citing a market research company, MarketsandMarkets. The point-of-care testing segment accounted for merely 10% of Abbott's revenues of $4.6 billion last year. But it is still considered to be the rapidly developing unit of the company's diagnostics business.

Abbott believe that its infrastructure and proficiencies in significant international markets will drive the development of Alere's set of products. With this acquisition, Abbot will be able to expand its client base and at the same time accelerate its growth in point-of-care testing business.

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