Alere rejected Abbott’s $50m offer to spike merger

Alere (NYSE:ALR) said yesterday that it rejected an offer from Abbott (NYSE:ABT) to pay up to $50 million to spike their pending, $5.8 billion merger, even as news broke of Abbott’s $25 billion bid for St. Jude Medical (NYSE:STJ).

The Chicago-area healthcare giant’s nearly $6 billion acquisition of Alere, the Waltham, Mass.-based diagnostics firm drew scrutiny after Abbott CEO Miles White appeared to throw some shade on it last week; the U.S. Justice Dept. has opened a probe into Alere’s sales practices and shareholders have sued to block the deal.

Yesterday Alere said its board “promptly rejected” Abbott’s offer to pay $30 million to $50 million to kill their merger, adding that “it is completely confident that there is no basis for a termination of the merger agreement and that the merger will be consummated in accordance with its terms.”

“In recent discussions between the parties, Abbott informed Alere that it has serious concerns about, among other things, the accuracy of various representations, warranties and covenants made by Alere in the parties’ merger agreement,” the company said. “In these recent discussions, Abbott affirmed its commitment to abide by its obligations under the merger agreement.”

St. Jude deal fuels split rumors for Abbott

Meanwhile, news of the St. Jude Medical buyout is spurring talk of a possible carve-out for Abbott’s medical device business; the company executed a similar maneuver 3 years ago when it spun out its branded pharmaceuticals business as AbbVie.

BMO Capital Markets analyst Joanne Wuensch said Abbott is likely to repeat the tactic after the St. Jude deal.

“Historically, when companies split, they perform quite well,” Wuensch said. “We remember when Baxter bought Gambro that was sort of signal that it would eventually split into 2.” Baxter, which paid $3.9 billion for the Swedish dialysis firm, later carved out its pharma division as Baxalta.

Gabelli Funds portfolio manager Jeff Jonas said White is likely to wait 2 or 3 years before engineering a spinout as the company integrates St. Jude and Alere and pays down its debt.

“But he’s certainly kept that option open now,” Jonas said. “I think he’d sell off the medical devices. Then you’d have nutritionals, generic drugs and diagnostics, which may or may not go with medical devices.”

For his part, White was cautious when asked on a conference call with analysts if a spin-off of the combined cardiovascular businesses is in the offing.

“I think right now you should be anticipating the integration of St. Jude and the performance of the company overall going forward as a healthy growth company in the healthcare space,” he said.

White defended the St. Jude deal, saying it would add 21¢ to adjusted earnings per share in 2017 and 29¢ the next year. Asked about the timing of the deal, after Abbott shot down rumors that the companies were in talks last summer, White said the talks did not begin until late 2015.

“I don’t know that anything has changed,” he said. “I’ve been open about being interested in M&A.”

Material from Reuters was used in this report.

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