Abbott's Alere Deal Continues To Face Uncertainty
While Abbott Laboratories' (ABT) - Get Report 30.7 billion pending deal for St. Jude Medical (STJ) remains on track, the healthcare company's CEO told investors on Wednesday that it continues to face questions when it comes to the pending $7.9 billion deal for Alere (ALR) that it failed to break up in April.
As acknowledged by analysts on a Wednesday morning conference call, the medical devices company has in recent months faced concern from investors that it is trying to take on too much challenge at once, having announced two sizable transactions in less than three months.
Abbott has seemingly been more focused on the problems facing Alere than on potential financing issues for both deals.
The company on Feb. 1 announced a $7.9 billion deal to purchase Alere, a provider of point-of-care testing that had spent the past several months streamlining operations following a management shake-up. Less than three months later, the Waltham, Mass.-based target disclosed on April 28 that it had rejected Abbott's attempt to withdraw its merger offer for a breakup fee of between $30 million and $50 million.
Abbott had hoped to end the deal amid concerns about Alere's delayed filing of its 2015 Form 10-K as well as a U.S. Department of Justice bribery probe of Alere announced on March 11 that was centered around whether it broke foreign bribery laws.
"From our perspective there's been no change," Miles D. White, the CEO and chairman of Abbott told investors Wednesday morning following the release of its second quarter earnings. "They [Alere] still haven't filed a 10-K. Our access to information has been limited."
While some financial information has been provided to Abbott, White asserted that it still has not received a fair amount of requested information. The CEO also criticized Alere's recent announced "update" on its Form 10-K, which included certain preliminary unaudited financial information.
"The announcement that they put out was not that forthcoming and I certainly wouldn't share the optimism that one of their analysts shared," White said of Alere's July 14 press release.
Even so, it appears that Abbott for now has no way to get out of the deal.
Alere is incorporated in Delaware, where merger agreement laws are notoriously tough and often don't allow companies to break merger agreements once they are made.
There is little precedence for when a party walks away from buying another in Delaware's Court of Chancery, which presides over these types of cases. In the two cases the court has heard on this matter, it has not allowed the buyer to walk.
"Whether it all works out the way originally planned or not I don't know," White said.
In the larger of its two pending deals, White said that Abbott's pending acquisition of St. Jude is "tracking well" and that there are "no big surprises" that would prevent it from completing the deal by the end of the year. He noted that it will be responding to a second request from the FDA regarding the transaction.
With respect to its quarterly results, Abbott on Wednesday beat analysts estimates by posting a 8% increase in earnings per share, to 55 cents for the quarter ended July 20 from 51 cents for the year earlier period, on a 3.2% increase in sales, to $5.3 billion from $5.2 billion.
St. Jude also reported it latest quarterly results on Wednesday. In line with analyst estimates, the company posted flat earnings for the second quarter of $1.06 earnings per share, up from $1.03 for the second quarter of 2015, despite an 11% increase in sales, to $1.56 billion from $1.41 billion.
Much of this sales boost came from the company's heart failure division, which saw worldwide sales advance by 48% from the year earlier period
Abbott shares jumped 2.1% to $42.67 a piece in Wednesday morning's trading session, assigning the company a $62.26 billion market capitalization.
St. Jude shares added 1.3% to $81.25 in morning trading, while shares of Alere fell less than 1% to $43.52.
--David Marcus and Alicia McElhaney contributed to this report