December 28, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Yesterday, Abbott Laboratories received approval from the U.S. Federal Trade Commission (FTC) for its $5.8 billion acquisition of St. Jude Medical .
In order to receive that and European approval, it agreed to divest St. Jude’s vascular closure device and Abbott’s steerable sheath to Japan-based Terumo.
What remains up in the air is its $5.8 billion acquisition of diagnostic test maker Alere . In December, Abbott filed in a Delaware court to terminate the merger, arguing that Alere “is no longer the company [Abbott] agreed to buy when the parties signed their merger agreement in January [2016].”
Abbott believes that Alere was deceptive during negotiations, withholding information about various U.S. federal investigations regarding its overseas sales practices in terms of anti-bribery laws. Those investigations, per Abbott, included an Alere subsidiary billing the U.S. government for services to hundreds of dead people, which led to revocation of its Medicare enrollment. And less than a month after the original deal was signed, Alere announced that because of the ongoing investigation, it wouldn’t be able to file its 10-K in a timely manner.
Alere is responding that the Abbott lawsuit is without merit, saying that “none of the issues [Abbott] has raised provides it with any grounds to avoid closing the merger.”
Seeking Alpha, in its analysis, notes that insider purchases of Abbott stock suggest the company’s confidence in completing the St. Jude acquisition and extricating itself from the Alere deal. Seeking Alpha writes, “Investors clearly believe that Abbott is likely to be able to walk away from its pending acquisition with Alere with minimal damage to itself or its shareholders given that Alere’s shares trade at about $40 a share, far below the $56 per share price that Abbott agreed to pay Alere shareholders.”
They speculate that Abbott will be able to abandon the deal without a payout to Alere, or buy the company at a significantly lower purchase amount because of deceptive negotiating practices.
In terms of the St. Jude’s acquisition, Seeking Alpha writes, “Not only will the St. Jude’s acquisition allow Abbott to drive revenue and earnings growth, but Abbott’s internal research and development will also allow it to drive revenue/profit growth. As Abbott moves towards closing its acquisition of St. Jude’s and resolving its disputed acquisition of Alere, we should note that the company’s third-quarter 2016 results were better than expected due to the strong performance of its established pharmaceuticals and medical devices divisions.”
The company has been unloading its slow-growth products. It sold its medical optics business to Johnson & Johnson . Its newly approved innovative products are expected to drive revenue growth.
Seeking Alpha is particularly focused on insiders’ acquiring company stock, noting that the chief executive officer, Miles White, acquired 369,950 shares in November 2016 for a total cost of approximately $15 million. The company’s executive vice president of Medical Devices, Robert Ford, bought 12,775 shares for about $499,120 on December 14, and Brian Blaser, executive vice president of Diagnostic Products acquired 15,580 shares on December 20 for a total of about $598,739.
Seeking Alpha writes, “We find such continued insider purchases in addition to Mr. White’s significant purchases continue to add to our confidence in continuing to invest in Abbott’s shares. While Abbott faces multiple acquisition-related uncertainties, as noted above, such insider purchase activity indicates a positive resolution of any outstanding acquisition uncertainty in Abbott’s favor.”
