Alere (ALR) is asking Delaware Vice Chancellor Sam Glasscock III for a September trial date in its lawsuit against Abbott Laboratories (ABT - Get Report) , which agreed to pay $7.9 billion in cash and assumed debt for Alere in a deal announced on Feb. 1. Alere, a provider of point-of-care testing, seeks a resolution of the case by the end of this month. Glasscock (pictured) has scheduled a telephonic hearing for 10:00 A.M. tomorrow to consider Alere's motion for expedition in a case where Alere is asking the judge to force Abbott to act "promptly" to secure FTC approval.
Waltham, Ma.-based Alere claims that Abbott Park, Ill.-based Abbott has cooled on the deal after agreeing to pay $25 billion for St. Jude Medical (STJ) on April 28 and is dragging its feet in obtaining antitrust approval for the Alere deal from the Federal Trade Commission.
Alere's request is aggressive, since the drop-dead date on the Abbott deal is April 30. With that much lead time, it Glasscock may not order a trial this month since a trial in the winter would leave plenty of time for a ruling and an appeal to the Delaware Supreme Court, especially if Abbott agrees to extend the drop-dead date if it loses the case.
Two lawyers not involved in the deal say that companies often spar over how best to obtain antitrust approval for a merger, though such disputes rarely go beyond posturing. The parties' merger agreement gives Abbott the responsibility for making antitrust filings, though the buyer must act in good faith, consult with Alere and make filings "as promptly as reasonably practicable" under the terms of the merger agreement.
In its Aug. 31 opposition to Alere's motion for expedition, Abbott called the matter "a tactical disagreement among the parties about how best to secure antitrust clearance" and termed Alere's suit "nothing but a publicity stunt. Certainly it is not a serious lawsuit."
One of the issues Alere has raised in its lawsuit is the amount of extra time Abbott has granted the FTC to review the merger. On May 2 the FTC issued a request for additional information extending its antitrust review. Under federal law the FTC must clear a merger or file a lawsuit seeking to block the deal within 30 days after the parties have submitted all the information the government says it needs to conduct its inquiry, unless the review period is extended voluntarily by the merging firms. However, Abbott gave the FTC more than the usual extra time to examine the deal, according to the proxy statement on the merger Alere sent to its shareholders.
Abbott agreed to provide the FTC at least 60 days advance notice before certifying substantial compliance with the information request and also agreed to give the commission 60 days rather than the typical 30 after the government's information request has been fulfilled. Although merging parties often enter such timing agreements with antitrust enforcers, two months warning before certifying compliance is at the long end of how much lead time the government generally is granted. One month is typical.
Regardless of the likelihood of expedition, Alere's suit shows it will act aggressively to hold Abbott to the merger agreement. In its complaint, a redacted version of which was made public on Aug. 30, Alere alleges that at a meeting of the two companies' top executives on April 19, Abbott General Counsel Hubert Allen offered Alere $30 million to $50 million to walk from the deal and threatened to find a way out of the transaction if Alere did not take the offer. According to the complaint, Allen said that "Abbott might simply run out the clock by failing to secure the necessary antitrust approvals" by the the drop-dead date. Alere claims that the next day Abbott CEO Miles White said his company "would make life a 'living hell for everyone at Alere'" if the company did not take the offer.
Abbott said in its motion to oppose expedition that it has acted in accordance with the merger agreement but has had to contend with significant problems at Alere, which according to Abbott submitted audited financials for last year only on Aug. 16. Alere's complaint, Abbott contends, is an attempt "to divert public attention from the drumbeat of regulatory problems, product recalls, criminal subpoenas, investigations and control failures that have plagued Alere since the parties signed the merger agreement."
But Alere says that it disclosed its issues to Abbott in the negotiations leading up to the deal and that Abbott did not ask to condition its purchase of Alere on the resolution of "ongoing government investigation."
The case is the second one this year that Glasscock has heard involving a troubled public company deal. In June the judge, whose courthouse is in Georgetown, De., found for Energy Transfer Partners (ETE) in a closely watched case where ETE claimed it had the right to walk from its agreement to buy Williams Cos. (WMB - Get Report) because ETE was unable to obtain a favorable tax opinion on the deal from its lawyers at Latham & Watkins.
James Hurst, Andrew Kassof and Brenton Rogers of Kirkland & Ellis in Chicago are advising Abbott in the litigation along with John O'Quinn in the firm's Washington office and William Savitt, George Conway and Carrie Riley of Wachtell, Lipton, Rosen & Katz in New York. Abbott is using William Lafferty of Morris, Nichols, Arsht & Tunnell in WIlmington as local counsel. Kirkland's Daniel Wolf, David Feirstein, Laura Sullivan and John Kupiec were M&A counsel. Abbott turned to Roger Altman, Andrew Steinberg, Bernhard Sakmann, Arun Abraham, Kenny Yung and Stu Francis of Evercore Partners Inc. for banking advice on the deal.On the litigation, Alere is using Bruce Birenboim, Andrew Gordon and Jaren Janghorbani of Paul, Weiss, Rifkind, Wharton & Garrison in New York along with Stephen Lamb, a former Vice Chancellor on the Court of Chancery, and Daniel Mason in the firm's Wilmington office. Paul, Weiss's Scott Barshay is the lead M&A partner on the deal. He moved to the firm from Cravath, Swaine & Moore in April. Michael Pittenger, T. Brad Davey, Matthew Davis, Jacob Kirkham of Potter, Anderson & Corroon in Wilmington are Delaware counsel to Alere. William Shepherd and Robbie Huffines of JPMorgan Securities LLC provided banking advice.