(Adds analyst comments, background; updates share prices)
By Ankur Banerjee
Feb 1 Abbott Laboratories said it would
buy Alere Inc for $5.8 billion and become the leader in
point-of-care diagnostic testing, a market that is growing as
physicians increasingly adopt rapid tests that speed up
Point-of-care tests provide results to doctors in a matter
of minutes and can be conducted in the physician's office, an
ambulance or even at home.
Waltham, Massachusetts-based Alere, which has annual sales
of $2.5 billion, makes tests for infections such as HIV,
tuberculosis, malaria and dengue.
"We view the deal positively as we think point-of-care
testing is the fastest-growing segment in the diagnostic
market," S&P Capital analyst Jeffrey Loo said.
The global diagnostics market, which is roughly $60 billion
in size, is growing at an overall rate of 5 percent and is
viewed as ripe for consolidation given its many smaller players,
according to Goldman Sachs.
Roche Holding AG is the industry leader with a 19
percent share of the market, followed by No. 2 Abbott with about
Abbott, which has expressed interest in expanding across its
business lines through acquisitions, will still have flexibility
for additional deals and could turn its attention to other areas
such as medical devices and generic drugs, said RBC Capital
Markets analyst Glenn Novarro.
Abbott will pay $56 per share in cash, a premium of about 51
percent to Alere's closing share price on Friday. Alere shares
were up over 45 percent at $54.08 in mid-afternoon trading on
Monday. Abbott was up 0.3 percent at $37.97.
Abbott, which makes products ranging from Similac infant
formula to Ensure beverages for adults, has struggled to boost
sales growth after it sold its developed-markets generics
business to Mylan NV in 2014.
The company, which spun off AbbVie Inc in 2013,
last week reported lower-than-expected quarterly revenue for the
first time in four quarters.
Canaccord Genuity analyst Mark Massaro said the acquisition
of Alere will help Abbott become the global leader in
point-of-care diagnostics and diversify its product line.
Abbott, whose 2015 worldwide diagnostics sales were $4.6
billion, said its total diagnostics sales would exceed $7
billion after the close of the deal.
The deal will immediately add to Abbott's earnings per share
upon close and contribute significantly thereafter, the company
Alere's net debt, currently $2.6 billion, will be assumed or
refinanced by Abbott.
Evercore is the financial adviser to Abbott, while Kirkland
& Ellis LLP is legal counsel. JP Morgan is Alere's financial
adviser, while Cravath, Swaine & Moore is legal counsel.
(Additional reporting by Susan Kelly in Chicago and Rosmi Shaji
in Bengaluru; editing by G Crosse and Saumyadeb Chakrabarty)