| NEW YORK, July 8
NEW YORK, July 8 An activist shareholder, which
has been battling Alere Inc's management, said investors
could more than double the value of their stock if they backed a
plan for the health diagnostics and services provider to offload
Coppersmith Capital Management LLC, which has a roughly 7
percent stake in Alere, made the claim in a letter to Alere
investors, viewed by Reuters, ahead of an Aug. 7 annual
shareholder meeting, where four of the 10 seats in its board of
directors are up for grabs.
Coppersmith is challenging the Waltham, Massachusetts-based
company's slate of four nominees to the board and has urged
Alere shareholders to back three of its candidates instead.
In its plan, Coppersmith calls for Alere to exit its
non-core businesses including its health care management
business -- called Health Information Solutions -- its consumer
products joint venture with Procter & Gamble, and,
possibly, its toxicology unit.
The hedge fund argues that Alere's stock price performance
has punished stockholders, delivering a negative 30 percent
five-year total return as of the end of May versus a positive
14.2 percent overall return for the NYSE Composite index.
Shares of Alere ended trading at $24.75 on Friday.
Coppersmith has put forward a plan it says can generate a stock
price for Alere of $43 to $58, representing a premium of between
74 percent and 134 percent.
Even if Alere shares did not climb to such levels on their
own, Coppersmith's plan would give the company such value in the
eyes of strategic and financial acquirors, the hedge fund said.
Coppersmith, founded by former partners of now-liquidated
activist fund MMI Investments, argues that the asset sale
proceeds, which it believes could total up to $3.8 billion,
should be used to lower the company's debt. It has also said
that cutting corporate overhead and spending could yield another
$50 million to $100 million in yearly cost savings.
An Alere representative did not respond to a request for
comment, while Coppersmith declined to comment.
In a letter to investors on June 27, Alere Chief Executive
Ron Zwanziger, who together with his family has a 5.2 percent
stake in the company, said Coppersmith's plan would destroy
value and "appears to be designed to create a flurry of
financial engineering activity at the expense of building a
Alere has its own plan to restructure the business, launch
new products and is engaged in active and ongoing discussions
with multiple parties concerning the divestiture of several
non-core businesses, Zwanziger said in the letter.
Coppersmith has previously argued that Alere should sell or
close its struggling health management business, which it had
built up through acquisitions worth $1.8 billion - with $1.4
billion of that amount already written off.
Alere's toxicology business offers drug testing products and
services to hospitals, clinics, law enforcement agencies and
rehabilitation centers and helps them detect drug or alcohol
abuse. Larger rivals Quest Diagnostics Inc and
Laboratory Corporation of America Holdings also make
drug-testing products and services.
Alere itself toyed with the idea of selling the unit in the
past. Chief Executive Ron Zwanziger said at the JPMorgan
healthcare conference in January 2011 that the company had a
"fair amount of debt" on the balance sheet and could opt to sell
the toxicology business if needed to pay down debt.
Selling the profitable toxicology and the consumer products
joint venture unit could trigger a sizeable tax. But Alere could
offset the tax hit by selling the health management business
first, to generate an "enormous" tax loss, Coppersmith has said.
Alere, which makes a range of diagnostic tools such as home
pregnancy tests and fertility monitoring kits, expanded its
disease management operations with the $900 million acquisition
of Matria Healthcare in 2008. It has a market value of $2
billion and total debt of $3.8 billion.