Is the Alere Dispute Hurting Abbott’s Strategic Position?

As the battle over the $5.8 billion Alere merger enters a new and nastier stage, there are indications that the conflict may be harming Abbott's strategic standing and ability to do other M&A deals.

The mess started in February when the sides first announced the deal that would have made Abbott the nation's leading provider of point-of-care diagnostics. A month later, Alere revealed that the Justice Department was looking into its overseas business dealings in Africa, Asia and Latin America. Abbott got cold feet and offered Alere a reported $50 million to call off the deal. Alere rejected the opt-out and demanded that Abbott consummate the deal.

Things got ugly with both sides accusing the other of bad faith. Frustrated by what it perceived to be Abbott's foot-dragging in securing Federal Trade Commission antitrust clearance, Alere escalated in August by filing a lawsuit to force Abbott to carry out its obligations under the merger agreement. The Delaware Chancery Court asked the sides to mediate but on Sept. 28, the talks broke down without a resolution. On Nov. 3, Abbott fired back, suing Alere for breach of contract.

Signs of a Thaw?
Yet, at the end of the day, the nastiness and litigation may just be a big bluff. In its most recent SEC filing, Alere said that it "is highly confident that the merger will" proceed. For its part, Abbott claims that its lawsuit against Alere is designed not to bust the deal but to acquire the information it needs about Alere's business practices to bring it to consummation. Barring a resolution, nothing will happen until Jan. 27 when the sides are scheduled to meet in court for a hearing.

Takeaway: The Strategic Implications for Abbott. We are hearing whispers that fallout from Alere may be compromising Abbott's ability to do other deals by making other potential targets wary of getting into bed with the diagnostic giant.

For example, one report cites point-of-care molecular testing company Cepheid Inc., which was acquired by Danaher Corp. for $4 billion in cash on Sept. 6, as an example of a strategic opportunity that Abbott lost as a result of the Alere mess. It is also unclear what impact the Alere situation may be having on the resistance Abbott is encountering from the European Commission in its efforts to secure antitrust clearance for its $25 billion acquisition of St. Jude Medical Inc. See LIR, May 19, 2016, for more background on the Abbott/Alere merger.