Abbott Laboratories filed suit to terminate its $5.8 billion purchase of Alere Inc., citing setbacks since the deal was signed in January that it says have significantly eroded the value of the medical-test maker.
Alere called the lawsuit “entirely without merit,” and said in a statement that it has complied with all of the terms under the merger.
Abbott, based in Illinois, is also in the process of buying Little Canada-based St. Jude Medical in a reported $25 billion deal.
The lawsuit is the latest twist in an acquisition that has been troubled almost from the start. In February, Alere disclosed a delay in filing its financial results with securities regulators because of revenue recognition problems in China and Africa.
That marked the beginning of a drumbeat of bad news as the company said it received subpoenas from the U.S. regarding bribery investigations and billing practices, restated earnings, pulled a product off the market and had its diabetes division excluded from the Medicare health insurance program after billing for patients who had already died.
The complaint, filed under seal Wednesday in Delaware Chancery Court, claims that Abbott has the right to terminate the transaction because the setbacks’ cumulative effect constitutes a material change in Alere’s prospects. A redacted copy of the suit will be available later this month under the court’s rules.
“Alere is no longer the company Abbott agreed to buy 10 months ago,” Abbott spokesman Scott Stoffel said.“These numerous negative developments are unprecedented and are not isolated incidents brought on by chance.”
While Alere acknowledged challenges, the Waltham, Mass.-based company said Wednesday that setbacks this year didn’t constitute a material change and insisted that the deal would close as originally agreed.
“As Abbott well knows, none of the issues it has raised provides it with any grounds to avoid closing the merger,” Alere said in a statement. “Alere will take all actions necessary to protect its shareholders and to compel Abbott to complete the transaction in accordance with its terms.”
Alere shares fell 8 percent Wednesday. Shares of Abbott rose less than 1 percent to $38.48.