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Reuters
New York
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 diagnostic-testing company.
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 Stock Exchange.
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 US 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.
