Abbott offered Alere $50M to walk away from their $5B merger — Alere sued instead

In August 2016, Alere, the rapid-diagnostics maker Abbott Laboratories had agreed to buy that February for almost $5 billion, filed a complaint in Delaware's Chancery Court to compel Abbott to make good on the agreement and promptly seek the antitrust approvals. Abbott, which had got cold feet, had offered Alere $50 million to forget about the deal — an offer Alere refused.

What spooked Abbott was Alere's own summer of disclosures: it had been subpoenaed in a foreign corruption investigation over payments in Africa, Asia and Latin America, was separately under a federal probe of its government-billing practices, and was late filing its 2015 annual report, as The Wall Street Journal reported. The July news of the Medicare and Medicaid billing probe sent Alere's stock down 29% to $31.47; by the Friday after the suit, shares closed at $40.69, far beneath the $56 deal price.

Earlier in August, Abbott had said the deal might not go through 'on a timely basis, or at all'. After Alere sued, Abbott stated it was in compliance with its obligations under the deal and continued to work toward the regulatory approvals — the Healthcare Dive analysis called it an example of the risks of becoming a reluctant buyer with potentially little recourse.

A rejected $50 million exit payment, a Chancery lawsuit, and a duty to close at $56 while Alere traded at $40.69.

The merger contract gave Alere a hammer: specific performance in Delaware Chancery Court is a standard remedy a determined seller can invoke.

Abbott's disclosures-based misgivings did not amount to a contractual exit, so the $50 million walk-away offer was the only lever it had — and it was one Alere could simply refuse.

The gap between the $56 deal price and the low-$40s market price made walking away expensive for Abbott in exactly the way the contract anticipated.

Alere's subpoenas and probes were disclosure events, not closing conditions Abbott had negotiated an out for.

Signing a merger means owning what you find later: a buyer who tries to leave with a cheque can end up contractually bound to buy at the old price.

As of the 29 August 2016 report, Abbott had reaffirmed it was in compliance with its obligations and was working toward regulatory approvals, with Alere's suit pending. The source does not cover whether the merger ultimately closed or on what terms.