Abbott Laboratories has agreed to proceed with its purchase of diagnostics firm Alere — for $500 million less than its original price offer.
"Under the amended terms, Abbott will pay $51 per common share to acquire Alere, for a new expected equity value of approximately $5.3 billion, reduced from the originally expected equity value of approximately $5.8 billion," states an Abbott press release.
Abbott announced in February 2016 its plan to acquire Alere, a deal that would make Abbott the largest point-of-care diagnostics provider in the world by expanding its platforms to include benchtop and rapid strip tests.
Just a month later, though, the transaction turned contentious when Alere was investigated by the U.S. Department of Justice for alleged irregular sales practices, among other issues. Abbott offered to rescind the deal, but Alere later sued Abbott and accused the latter of delaying antitrust submissions to sabotage the deal. Still, the two companies attempted to make the transaction work despite legal wrangling, and analysts believed that a deal could still push through.
Abbott CEO Miles White said in October that he still considered Alere a "strategic fit" that would yield a "long-term post-merger opportunity." The proposed merger received a boost around that time when European regulators approved the deal, pending the sale of Alere's Epoc, Triage, and BNP reagents businesses.
In its earlier attempt to withdraw from the deal, Abbott cited a "substantial loss" in Alere's value, and this week's amended terms reflected that stance.
"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. "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."
Under the renegotiated terms, Abbott and Alere agreed to dismiss their respective lawsuits against each other.
"We believe this is an equitable settlement," stated Abbott spokesman Scott Stoffel, reports the Chicago Tribune. "Point of care is an attractive, growing segment with growth opportunities in both developed and emerging markets. Our core strategic intent — to build a leadership position in this segment — remains the same."
According to Abbott, point-of-care testing is a $5.5 billion market and one of the fastest growing in vitro diagnostics segments. The company says more than half of Alere's $2.5 billion in sales are generated in the U.S., where there is growing use of point-of-care devices not only in traditional care settings like hospitals and clinics, but also at home. Alere also is expanding in emerging markets where POC testing represents a cost-effective alternative to healthcare systems without large laboratory facilities and equipment.