NEW YORK (GenomeWeb) – Abbott said today that it has filed a complaint in the Delaware Chancery Court to terminate its proposed $5.8 billion acquisition of Alere.
In a statement, Abbott said that it wants out of the deal because of "the substantial loss in Alere's value following the merger agreement," and what it described as adverse events that materially change Alere's long-term prospects.
Since signing the merger agreement, Abbott said, "Alere has suffered a series of damaging business developments," including the government eliminating the billing privileges of a substantial Alere division, the permanent recall of an important product platform, multiple new government subpoenas — including two new criminal subpoenas — a five-month delay in filing its 10K, and admissions of internal control failures requiring restatement of its financial results from 2013 to 2015.
"Alere is no longer the company Abbott agreed to buy 10 months ago," Scott Stoffel, divisional vice president of external communications at Abbott, said in a statement. "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."
However, Alere responded, saying that none of the issues Abbott has raised "provides it with any grounds to avoid closing the merger." Alere said that it is not only in compliance with contractual obligations under the merger agreement, but it is "highly confident that the merger will be completed in accordance with the terms set forth in the merger agreement."
"The lawsuit is entirely without merit," the firm added.
Abbott's complaint marks the second time this year that the firm has attempted to terminate the deal.
In April, Abbott stated "it has serious concerns about, among other things, the accuracy of various representations, warranties and covenants made by Alere in the parties' merger agreement." Abbott offered to pay Alere a termination fee of $30 million to $50 million to pay for Alere's transaction expenses, but Alere's board rejected the offer.
Alere sued Abbott in August to push its potential acquirer to fulfill its obligations under the terms of their merger agreement and act promptly in obtaining the required antitrust approvals. In September, the Delaware Chancery Court recommended that the parties consider mediation, but a subsequent SEC filing from Alere stated that "mediation concluded without resolution," and that the matter was still pending.
In early October, Alere said an order from the Delaware Chancery Court provided a detailed, confidential schedule of actions that must be taken at specific times to achieve the antitrust clearances required by the merger agreement. The firm noted that the court order also required that Abbott provide Alere with notice of all future talks with antitrust regulators, and enable Alere to join in those talks.
In November, Alere filed its financial results for the third quarter of 2016, reporting a 4 percent decrease in revenues year over year. The report put the firm back on track with the timing of quarterly earnings filed with the US Securities and Exchange Commission.
The day before it announced its earnings, however, Alere was sued by Abbott for breach of contract. At the time, an Abbott spokesman told GenomeWeb that the company was looking to obtain documents and information as promised under their merger agreement, not to terminate the deal.
Abbott said today that under terms of the merger agreement, it may terminate the transaction if adverse events materially change Alere's long-term prospects. Alere said it will take all actions necessary to protect its shareholders and to compel Abbott to complete the transaction in accordance with its terms.
Alere shares were down more than 7 percent to $36.92 in afternoon trading on the New York Stock Exchange, while Abbott shares were down a fraction of a percent at $38.38.