Is This $8.4 Billion About to Fail and Hammer Alere Stock?

Hammer Alere StockAlere Inc (NYSE:ALR) and Alere stock are down 7.4% on Wednesday as Abbott Laboratories (NYSE:ABT) said it is looking to terminate its $8.4-billion acquisition of the diagnostics company, claiming that Alere has suffered a “substantial loss” in value since the deal was agreed upon 10 months ago.
Alere stock sits at $36.85 on Wednesday afternoon, which is a far cry from the $56.00 per share offer in the deal struck by Abbott in January. (Source: “Abbott seeks to abort planned acquisition of Alere,” Reuters, December 7, 2016.)

Alere stock has been beset on all sides by investigations and scandals leading up to and past the date when the deal was finalized. There are investigations into billing and foreign sales practices, device recalls, and even allegations of seeking remuneration for 211 dead people on Medicare by the Arriva diabetes division. (Source: “Abbott and Alere: Order in the Court,” Bloomberg, December 7, 2016.)

“This damage … can only be the result of a systemic failure of internal controls, which combined with the lack of transparency, led us to filing this complaint,” said Scott Stoffel, divisional vice president of external communications at Abbott. (Source: Reuters, op cit.)

In response, Alere made its case that the deal ought to go through and laid out its next move.

“Alere will take all actions necessary … to compel Abbott to complete the transaction in accordance with its terms,” the company said.

Some analysts believe that Abbott is simply posturing in order to help renegotiate the share price down for the deal after Alere stock has fallen so dramatically, while others are convinced that, despite all the obstacles, Alere would still make a good asset.

Since the deal was agreed upon, Alere stock has fallen nearly 32%. News like this will, of course, not help foster a redemptive uptick. But, with a lot of analysts trying to parse out the true motivation behind Abbott’s announcements—judging whether the company truly does want to kill the deal or simply renegotiate for a more desirable price—this will certainly be a deal worth keeping  your eyes on.