Coppersmith Capital Sends Letter to Gregg Powers, Newly Appointed Chairman of Alere, Inc.
NEW YORK--(BUSINESS WIRE)--Coppersmith Capital Management, LLC today announced that it has sent a letter to Gregg Powers, the newly appointed Chairman of Alere, Inc. (NYSE:ALR).
The full text of the letter follows:
June 19, 2014
Mr. Gregg J. Powers
Chairman & Chief Executive Officer
Private Capital Management
8889 Pelican Bay Blvd
Naples, FL 34108l
As the owner of approximately 2.3 million shares of Alere, Inc., let us congratulate you on your election as Chairman of Alere’s Board of Directors. I wish you luck, particularly as you are now personally responsible for the strategic and operational disorder at Alere. I know you’re smart enough to see the obvious path forward to creating value for Alere – I hope you’ll have the courage.
With the 2015 due-dates for Alere’s strategic plan targets around the corner, let’s review where Alere is today: SG&A margin has increased to 30.6% instead of the forecast decline to 28%; Professional Diagnostics organic growth has declined to -1% instead of accelerating to mid-to-high single digits; and despite the $600mm in near-term divestiture proceeds promised last year, Alere has announced no divestitures, failing spectacularly in its attempt to complete an initial public offering (IPO) in the UK of BBI Diagnostics Group plc. Who could have ever foreseen the failure of an overseas IPO with a poorly-run majority owner, a non-integrated, thematically-disparate bag of assets, an illiquid JV comprising roughly half its valuation and severe restrictions on its ability to deploy capital?
Thankfully there is a better option: we understand that Alere has received unsolicited expressions of interest from potential strategic acquirors within the last year, but has failed to engage interested parties. As such, we believe Alere can be sold today at a significant premium to its current stock price.
As Chairman of a diagnostics company, I would hope you’d appreciate the value of early detection: Alere’s management and strategic plan appear to be failing, horribly. You can choose to wait until the patient is on life support, or you can muster the conviction to do something about it now. The strategic and operational review Alere has announced is a fine example. Alere will undoubtedly spend months and millions on this process, only to confirm what the Board likely already knows or, perhaps more disturbingly, to give it the courage it needs to prove it to Ron Zwanziger. Coppersmith has already spent excessive time and money on the question of how to fix Alere, so let us help by sharing our findings:
- Ron Zwanziger has failed as CEO of Alere. Creating virtually no stockholder value and billions of liabilities and write-downs over five years should prove that to any sane business person. It is time to move on.
- Even if Connected Health (CH) is the wave of the near-future, Alere does not have the personnel, assets or market positions to be a meaningful competitor. Even in Ron’s wildest fantasies of contract wins this year, CH will not contribute meaningfully to Alere’s bottom line, soon or potentially ever. We believe this is why Alere has NEVER articulated a profitable CH business model, even as shareholders starve for such disclosure.
- Even under new management, Alere’s underperforming businesses and bloated capital structure will take significant time and risk to fix. On the other hand, Alere’s assets retain meaningful value and can be monetized today at an attractive premium for shareholders.
We had hoped that driving Alere to replace half its Board, demote its Chairman and commence a review of strategy and operations would be enough to convince the Board to be realistic, finally, about Alere’s performance and prospects. We believe it is time to engage a new investment bank (unaffiliated with past failures) to explore all strategic alternatives including the sale of the company. Sometimes holding out for better performance doesn’t get you more value. Sometimes it gets you less.
Cc: Alere, Inc. Board of Directors