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UPDATE 4-Abbott says to buy diagnostic test maker Alere for $5.8 bln
February 1, 2016 / 1:36 PM / 2 years ago

UPDATE 4-Abbott says to buy diagnostic test maker Alere for $5.8 bln

(Adds analyst comments, background; updates share prices)

By Ankur Banerjee

Feb 1 (Reuters) - 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 treatment.

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 11 percent.

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 said.

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

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