Investors Look For Gains As Abbott Labs Set To Acquire Alere

 | Jul 09, 2017 09:44PM ET

Abbott Laboratories (NYSE:ABT) provided some good news for investors as the much-contentious merger of the company with Alere is a step closer to completion. On majority of Alere shareholders’ recent approval in favor of the merger, the deal is now expected to close by the end of third-quarter 2017. However, it is still subject to satisfaction of the customary closing conditions, including applicable regulatory approvals.

This news follows the announcement of an amendment of the original merger agreement in April. Per the amended terms of the agreement, Abbott has agreed to pay $51 per common share to acquire Alere, a reduction from the earlier deal of $56 per common share in cash upon the transaction’s completion. This results in an expected, new equity value of approximately $5.3 billion, lower that the originally estimated equity value of almost $5.8 billion.

With this amendment, both the companies agreed to dismiss their respective lawsuits that they were engaged in on issues regarding the pending merger. Significantly, the original contract was made on Feb 1 2016.

Our take

Abbott had earlier stated that with the successful completion of this transaction, its total diagnostics sales should exceed $7 billion. The company also expects to emerge a lead player in the $5.5 billion point-of-care diagnostic segment with this consolidation.

The acquisition would enable Abbott gain an access to new channels and geographies, including entry into fast growing outlets, such as doctors’ offices, clinics, pharmacies and at-home testing. It will also add Alere’s complementary portfolio of diagnostic products, comprising tests for infections such as HIV, tuberculosis, malaria and dengue. Notably, Alere develops simple, rapid tests, including Alere i, the molecular test for flu and strep, to deliver reports in less than 15 minutes.

Hence, the combined business will offer several options of tests in a broad array. For instance, infectious disease, molecular, cardiometabolic and toxicology testings. Plus, this union would definitely expand Abbott Labs’ platforms to include benchtop and rapid strip tests. Although Alere has generated over half its total sales from the U.S. alone, the company has a growing presence in key international markets with a potential to strengthen the Abbott’s business ahead in these territories.

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