Abbott’s Deal for Alere Turns Nasty as Firms Brawl in CourtBy and
Unsealed Alere suit provides new details on faltering merger
Abbott counters with allegations of Alere coaching witnesses
In a newly unsealed lawsuit, Alere accused Abbott of trying to back out of the $5.8 billion purchase by dragging its heels with regulators and threatening to make its life a “living hell” by burying the company in paperwork over the merger.
Abbott countered with its own claims of Alere’s deception, accusing the company withholding information about federal probes and of coaching witnesses to lie about its Indian operations. Alere is already facing investigations by federal prosecutors into its overseas sales practices under anti-bribery laws.
Court documents highlight the animosity between executives at the two companies as Alere presses to consummate the deal while Abbott says it needs more information to understand the smaller firm’s troubles and verify the accuracy of its regulatory filings.
“It would be irresponsible to not have second thoughts about acquiring a company that is being investigated for Medicaid and Medicare billing and foreign corrupt practices,” Erik Gordon, a professor at the University of Michigan’s business and law schools who’s been following the dispute.
“Abbott knows it would be buying trouble, but it doesn’t know how much trouble. One federal criminal inquiry after another is enough to give anyone cold feet,” Gordon said.
Alere’s stock, which has traded well under the $56-a-share offer for months during the dispute over the deal, fell further after it filed suit on Aug. 25 and continued to fall Wednesday. Alere fell 0.5 percent to close at $39.13 in New York, while Abbott fell about 1.9 percent to $42.02.
Abbott spokesman Scott Stoffel called the suit “nonsense” and said it has no merit.
“Their description of the events is fiction and nothing but a publicity stunt,” Stoffel said in a statement Wednesday. “Abbott is compliant with its obligations under the merger agreement.”
Jackie Lustig, an Alere spokeswoman, said Abbott was already aware that the allegations about impropriety in India were fully investigated and found to be false. She declined to go into further detail.
The acquisition deal, signed Jan. 30, ran into trouble after Alere delayed filing documents about its 2015 financial performance with securities regulators. The company has since disclosed two U.S. probes into some of its businesses overseas and its billing practices in the U.S.
Alere has failed to turn over information about the company’s foreign operations that are facing bribery probes as part of the merger agreement, Abbott said. Federal prosecutors have issued grand-jury subpoenas for information about Alere’s operations in Asia, Africa and Latin America.
Abbott officials said they were tipped off to alleged wrongdoing in India while investigating claims brought by a whistle-blower as part of their merger review. The whistle-blower told the officials that Alere executives had suggested Indian workers provide bogus information about the firm’s operations to Abbott auditors, according the Delaware filing.
Alere’s finance chief in India was also sent on a “long leave” of absence to keep him away from Abbott interviewers, according to the filing. The interviewers found out only when contacted by the finance chief himself, who said management’s assertions that he was unavailable were “wrong.”
“I am very much available but not allowed to come to the office. (They suspended me with pay),” the unnamed official said, according to Abbott’s filing. “They have done this so that the truth will not come out in front of Abbott leadership.”
Alere contends Abbott officials got cold feet about the takeover after agreeing to buy medical-device maker St. Jude Medical Inc. for $25 billion in April. Closing both deals will stretch Abbott’s financial limits, forcing the health-care company to issue more equity, triple “its debt load and likely lowering its credit rating,” Alere said in its complaint made public Wednesday in Delaware Chancery Court.
Abbott has tried to scuttle the deal, Alere said, by subjecting it to an “endless and steady stream of unreasonable and extremely burdensome requests for both documents and interviews of Alere personnel.”
In response to Abbott’s requests, Alere has provided nearly a million pages of documents and made 33 employees available to Abbott’s outside litigation counsel for adversarial interviews, the suit claims. Still, it has found no breach of any aspect of the merger, Alere said.
Abbott officials have offered Alere executives as much as $50 million to cover the company’s legal costs in exchange for ripping up the contract. That proposal was rejected by Alere’s board earlier this year.
The case is Alere Inc. v. Abbott Laboratories, CA 12691, Delaware Chancery Court (Wilmington).
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