Abbott's $5.8 Billion Deal for Alere Is Device Sector's Latest

Abbott Agrees to Buy Alere for $5.8 Billion
  • Stryker, Medtronic also announced medical device deals Monday
  • CEO says Abbott has appetite for acquisitions in other areas

Abbott Laboratories agreed to buy Alere Inc. for $56 a share, or about $5.8 billion, to become the leader in the market for rapid medical tests and adding another deal to a long list in the fast-consolidating medical devices and technology space.

The agreement will boost Abbott’s diagnostics sales to about $7 billion, Chief Executive Officer Miles White told investors on Monday, and add tests for heart attacks, influenza and drug abuse to Abbott’s suite of products for testing genetic mutations that can assess patients’ reactions to pharmaceuticals or can help guide cancer therapy.

“The demand for point-of-care testing is accelerating as health care providers and consumers look for better ways to get fast, accurate and actionable information to guide decision making that improves patient care and reduces unnecessary health care” spending, White said on a conference call.

The medical device sector has been consolidating in the face of pressure from hospitals and health systems to cut costs. Last year, there were 1,007 pending or completed deals in the industry, worth a total of $58.9 billion, according to data compiled by Bloomberg.

More Deals

Two more were announced on Monday, as Stryker Corp., a market leader in artificial hips and knees, agreed to buy Sage Products LLC for $2.78 billion in cash from its private equity owner Madison Dearborn Partners. Medtronic Plc, the largest manufacturer of heart rhythm devices like pacemakers, agreed to acquire Bellco, a privately-held company that sells equipment for kidney dialysis. Terms of the deal weren’t disclosed.

Abbott’s purchase of Alere will add 12 to 13 cents to Abbott Park, Illinois-based Abbott’s earnings per share in 2017 and will yield cost savings of $500 million by 2019, the companies said in a statement Monday. Abbott will also take on $2.6 billion of debt from Alere, which posted sales of $2.59 billion in 2014.

Alere shares soared 45 percent to $54.03 at 10:15 a.m. in New York. Abbott fell 2 percent to $37.10.

White said that the Alere deal won’t restrict his interest in acquisitions in other areas. While the company has about $6.1 billion in cash and short-term assets, thanks in part to its equity stake in Mylan NV, Abbott will finance the Alere deal with debt, White said.

“We’ve got plenty of capacity and plenty of opportunity,” White said on the call. “This is a pretty fundamental and key acquisition we’re talking about today for our diagnostic business, but it’s not the only thing on my radar screen and it’s not the only thing in the center of my radar screen.”

Evercore Partners Inc. served as Abbott’s financial adviser, and Kirkland & Ellis as legal adviser. Alere, based in Waltham, Massachusetts, was advised by JPMorgan Chase & Co., and by the law firm Cravath, Swaine & Moore.

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