Abbott files lawsuit to terminate proposed Alere acquisition

Abbott announced on Dec. 7 that it had filed a complaint in the Delaware Court of Chancery to terminate the company’s proposed acquisition of Alere.

On Jan. 30, Alere agreed to acquire Alere for $5.8 billion. Abbott said in a news release that since the agreement Alere “has suffered a series of damaging business developments.” Alere develops diagnostics tests for cardiometabolic disease, infectious disease and toxicology.

“Abbott’s lawsuit is entirely without merit,” Alere said in a news release. “As Abbott well knows, none of the issues it has raised provides it with any grounds to avoid closing the merger. Alere has fully complied with its contractual obligations under the merger agreement and is highly confident that the merger will be completed in accordance with the terms set forth in the merger agreement. Alere will take all actions necessary to protect its shareholders and to compel Abbott to complete the transaction in accordance with its terms.”

Abbott cited a few issues with Alere, including a five-month delay in filing its 10-K for 2015, multiple government subpoenas and the recall of the INRatio and INRatio 2 prothrombin time/international normalized ratio monitoring system, which is used to monitor warfarin.

“Alere is no longer the company Abbott agreed to buy 10 months ago,” Scott Stoffel, Abbott’s divisional vice president of external communications, said in a news release. “These numerous negative developments are unprecedented and are not isolated incidents brought on by chance. We have attempted to secure details and information to assess these issues for months, and Alere has blocked every attempt. 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.”

Since the lawsuit was filed, Alere’s stock price fell from $39.86 per share on Dec. 6 to $37.35 per share in premarket trading on Dec. 9. Abbott’s stock price, meanwhile, has increased from $38.42 per share to $38.68 per share during the same time period.

Kai Liekefett, an attorney not involved in the case, told Bloomberg that no company has been successful in a Delaware court with regards to material changes at a target company leading to involuntary termination of a proposed acquisition.

“It looks like they have a number of issues here that, taken together, could very well constitute a material adverse effect,” Liekefett told Bloomberg. “It would not surprise me if a Delaware court would find a material adverse effect in this instance. In fact, I find it more likely than not. If ever I wanted to exit a deal, I would hope for facts like these.”

However, Liekefett also said that “Abbott might still be interested in buying Alere, just not at this price. They also have to determine if they can get comfortable with the government investigations and restatement risks.”

In April, Abbott agreed to acquire St. Jude Medical for approximately $25 billion. That deal, which is subject to customary closing conditions, is expected to close by the end of the year, but nothing has been announced yet.

Abbott and St. Jude Medical agreed in October to sell a portion of their vascular closure and electrophysiology business for $1.12 billion to Terumo Corporation.