* Abbott, Alere say they agreed to dismiss respective
* Abbott's new offer values Alere's equity around $5.3 bln
vs $5.8 bln
(Adds context, analyst's comment)
April 14 Diversified healthcare company Abbott
Laboratories on Friday agreed to buy Alere Inc
at a lower price than it had previously offered, after raising
concerns about the accuracy of various representations,
warranties and covenants made by Alere in the earlier agreement.
Abbott's revised offer values Alere's equity around $5.3
billion, down from the about $5.8 billion announced in February
last year, the companies said in a statement, ending a prolonged
legal battle over Abbott's plan to acquire the
Abbott will now pay $51 per share for Alere, compared with
its earlier offer of $56. The new price was a much better
outcome than what Alere's shareholders had priced in, given that
Alere's shares closed at $42.31 on Thursday on the New York
While the new deal values Alere at 26.84 times forward
earnings, Alere's peers are on average valued at 37.9 times,
according to Thomson Reuters data.
The new $51 per share deal price is in the middle of the
initial $49 to $53 per share range that Abbott had indicated it
would be willing to pay for Alere when it first discussed an
acquisition in December 2015, according to Alere's proxy
statement to its shareholders.
Abbott at the time had not carried out due diligence on
Alere, and subsequent negotiations led to a deal being agreed
early last year.
However, the deal ran into trouble within months of being
announced, as Alere received a grand jury subpoena from the U.S.
Department of Justice in March last year seeking documents
relating to the company's sales practices, and delayed filing
its annual report.
Both the companies ended up suing each other last year, with
Alere forcing Abbott to move ahead with the deal, and Abbott
wanting to back out of the deal citing a "substantial loss" in
the value of the diagnostics company.
"The renegotiated price is in the realm of investor
expectations and seems to reflect the impact from some of the
challenges witnessed in Alere's business over the last 12
months," Raymond James analyst Nicholas Jansen told Reuters.
Alere has also delayed filing its 2016 annual report and has
not yet fixed material weaknesses with respect to its revenue
recognition practices disclosed in its 2015 annual report.
"We think the new merger agreement now includes all of the
known issues that have developed so would not expect any risk to
the future of the deal unless something else emerges as of
today's date," Jansen said.
Abbott and Alere said on Friday that the companies had
agreed to dismiss their respective lawsuits, and the deal is
expected to close by the end of the third quarter of 2017.
Waltham, Massachusetts-based Alere, which makes tests for
infections such as HIV, tuberculosis, malaria and dengue, while
Abbott Park, Illinois-based Abbott sells medical devices,
nutritional products and baby formula.
The deal will help Abbott expand in point-of-care diagnostic
testing, a market that is growing as physicians increasingly
adopt rapid tests that speed up treatment.
Point-of-care tests provide results to doctors in a matter
of minutes and can be conducted in the physician's office, an
ambulance or even at home.
The news about the revised deal was first reported by the
Financial Times, citing people close to the matter. (on.ft.com/2nLyoDG)
Up to Thursday's close Alere shares had risen 8.6 percent
this year while Abbott had increased 11.1 percent to $42.67.
(Reporting by Rama Venkat Raman and Ankit Ajmera in Bengaluru;
Editing by Vyas Mohan, Andrea Ricci and Bernard Orr)