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Alere
The Right Strategy & Board Leadership to Create Long-Term Value
July 2013 |
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of
the federal securities laws. This includes all statements concerning or
relating to anticipated improvements in revenue, margins and earnings,
trends in chronic diseases, industry trends, changes in demand for our products
and services, market responses to our strategy, anticipated cost savings,
anticipated debt reduction, potential divestitures, product launches and the
independence of our Boards director nominees. Such forward-looking
statements are estimates reflecting managements best judgment based
upon current information and involve a number of risks and uncertainties.
Actual results and the timing of events could differ materially from those
projected or contemplated by the forward- looking statements due to
numerous factors, including without limitation our ability to successfully integrate our
acquisitions and to recognize the expected benefits of restructuring and new
business activities; our exposure to changes in interest rates and foreign
currency exchange rates; our ability to successfully develop and
commercialize products and services; the market acceptance of our products and
services; continued acceptance of
health
management
services
by
payers,
providers
and
patients;
our
ability
to
develop
enhanced
health
management programs through the integrated use of innovative diagnostic and
monitoring devices and to recognize the expected benefits of this strategy;
the impact of healthcare reform legislation, as well as future reform
initiatives; changes in patient behavior; unexpected expenses; the content and
timing of regulatory decisions and actions, including the results and
consequences of FDA inspections and the OIG subpoena, as well as the impact
of changes in reimbursement policy and budgetary constraints, both in the United
States and abroad; the effect of pending and future legal proceedings on
our financial performance and the risks and uncertainties described in our
periodic reports filed with the Securities and Exchange Commission, including our
Form 10-K for the year ended December 31, 2012. We undertake no
obligation to update forward-looking statements. 1 |
Who We
Are and What Our Mission is 2
Who we are:
Alere is specialized in the diagnosis and management of chronic
diseases
Alere is a world leader in this industry, with growth driven by
fundamental long-term trends in the incidence of chronic
diseases
What our mission is:
Alere empowers individuals to take greater control of their health
under the supervision of their healthcare providers |
Alere
is a Global Industry Leader Poised for Growth 3
Chronic diseases account for more than 60% of deaths worldwide
Chronic diseases affect 45% of the U.S. population and are growing rapidly
Adoption of molecular testing, which will improve performance, expand
reimbursement and increase usage of diagnostic testing
Demand
for
more
effective
chronic
disease
monitoring
and
management
of
patients
at
home through the combination of diagnostics and disease management
Additional
diagnostics
sales
will
arise
by
connecting
physicians
and
patients
with
real
time diagnostic information to provide more effective home patient
management Alere is a global leader in the manufacture and development of
point-of-care products for the diagnosis and management of chronic
diseases: Cardiovascular Diseases
Infectious Diseases
Toxicology
Diabetes
Global trends that we believe will drive growth at Alere include:
The
increased worldwide adoption of diagnostics to provide early diagnosis and
better treatment outcomes for patients with chronic diseases
|
KEY
FACTS Of worldwide deaths are
caused by chronic disease
60%
Of the global annual GDP
represents the economic
burden associated with
chronic disease
4%
Of US GDP is spent on
healthcare, and chronic
disease
makes
up
75%
of
this expense
17%
Of the U.S. population is
affected by chronic
disease
45%
Of premature heart
disease, stroke, and
diabetes can be prevented
80%
Of adults over 20 living in
the US are overweight or
obese
68%
The Size of The Worldwide Chronic Disease Problem
4 |
We
believe that the changing healthcare landscape will drive demand for more effective diagnosis and
management of chronic disease patients by connecting physicians and patients with
real time diagnostic information
In the US, these changes include the growing burden of healthcare regulations
under the Affordable
Care
Act
that
has
caused
the
emergence
of
Accountable
Care
Organizations,
which
tie
reimbursements to providers (physicians & hospitals) to achieving healthcare
quality goals and patient outcomes
Globally, these changes include the growing need to produce better outcomes for
chronic disease patients while reducing costs
In response to these changes, healthcare providers are seeking (i) real-time
access to patient care information that is captured from all healthcare
settings, (ii) better decision support tools and (iii) comprehensive care
management programs Alere has commercialized an integrated system comprised
of point-of-care diagnostics, health information systems and
chronic care management programs We are well positioned to leverage our
existing customer relationships and sales and marketing channels to deliver
these solutions both in the US and on a global basis We believe integrated
systems like ours address current needs and increasingly will represent the
future of healthcare, providing comprehensive, real-time healthcare
information and programs to facilitate early intervention and management of
chronic conditions Our solutions will allow for reduction in overall
healthcare costs and improvement in outcomes Alere is Well-Positioned to
Take Advantage of Rapid Changes in Healthcare
5 |
BUSINESS UNITS -
SALES
REGIONAL MARKETS -
SALES
TOTAL NET SALES
2012: $2.8 billion
Current View of Business
6
Cardiology
16.7%
Toxicology
21.4%
Other
11.1%
Infectious Disease
22.8%
Heath Information
Services
18.8%
Diabetes
5.8%
Consumer Diagnostics
3.3%
North America
62.0%
Europe
18.0%
Asia Pacific
11.0%
LA & Africa
9.0% |
Alere
Has Put in Place Fundamental Changes to Address Past Performance
7
Since our inception in 2001, Alere has executed a series of strategic acquisitions
in an effort to apply its integrated solutions to the global challenges of
chronic disease With the formation of Alere largely completed, the Company
has taken several steps since our 2012 annual meeting to implement changes
that will continue to drive long-term value Announced
new
strategy
in
November 2012 to drive organic growth, reduce costs and
deleverage
Stock price performance reflects positive reaction to new strategy
Recent quarterly performance shows improvement in core businesses
Declassified Board of Directors to provide greater accountability to
stockholders Management incentives remain closely aligned with stockholders
via significant ownership that is among highest insider ownership of peer
group Nominated four new non-incumbent directors to Alere Board
Significant move to remake our Board with 40% of directors replaced and 1/3
reduction in insider representation
New
directors
will
be
independent,
offering
fresh
perspective to guide future strategy |
New
three-point plan as of November 2012 Focus on organic growth
Operational improvement and cost
reductions
Deleveraging via cash flow and prudent
non-core divestitures
Giving Alere Stockholders a Clear Choice
Alere
Coppersmith
Strategy for
Alere
Long-term Value Creation
Director Nominees
Alignment and
Accountability
Destroys Value and Ability to
Sustain Long-term Growth
Short-term strategy focused on financial
engineering
Delever at all costs
Divest a high growth core business
Fire sale/shutdown another core business
Substantial dilution to EPS
No specific ideas for cost savings
Highly qualified healthcare CEOs
Relevant management and Board
experience to guide Alere
Independent,
fresh
perspective
with
no
pre-
set agenda
No full-time healthcare CEO experience
Minimal Board experience
Pre-determined agenda by Coppersmith
Alere management aligned with stockholders
via significant ownership
Declassification of Board provides
accountability to stockholders with annual
elections
Short-term focus to detriment of long-term
value
Coppersmith not aligned with interests of all
stockholders
Coppersmith co-founder has poor track
record of stockholder value creation when
board candidates are elected
8 |
New
Strategy: Organic Revenue Growth 9
New or Near Term Product Launches
Alere I
molecular diagnostic tests for Rapid flu on track for submission by year end
2013 Alere Q
molecular diagnostic tests for HIV, HCV and TB
US launch of CD4 Analyzer
US launch of Determine Combo HIV screening test
Epoc Blood Analysis System
Commercial rollout of connected health software platform
Expansion of business in underpenetrated markets of Asia, Latin America and
Africa Continued recovery in health information solutions
Expansion
in
diabetes
diagnostic
sales
through
low
cost provider positioning
Alere expects to reestablish historic organic growth rates from several sources:
Growth in Existing Businesses
Growth in Triage product sales as manufacturing capacity constraints are
eliminated and customers are recaptured
Expanding revenue from toxicology business as price adjustments annualize
|
10
New Strategy: Focus on Expense Reduction
Company-wide focus on margin improvement and expense reduction to generate
dependable, long- term cash flow
Simplify corporate structure and improve operational execution
Standardize key business processes and globalize shared services
Drive economies of scale by consolidating expenses across multiple business
units Aggressively relocate support functions and manufacturing to
lower-cost geographic environments
Consolidation savings and automation implemented across Aleres global
manufacturing footprint Redirecting R&D spending towards product
enhancement and extensions with focus on near-term returns rather than
long-term platform development Appointed Namal Nawana as Chief Operating
Officer Former 15-year executive at Johnson & Johnson with global
operational experience integrating large, complex acquisitions
Focused
on
improving
operational
execution
and
operating
expense
leverage
opportunities
throughout
Aleres business globally
10 |
New
Strategy: Focus on Deleveraging Debt has been a highly attractive source of
capital for growing our business Current weighted average cost of debt of
approximately 5% Strong debt trading levels, and recent bond offering,
reflect favorable view of Alere by debt markets
Alere is committed to achieving its goals for paying down debt in a manner that
creates value for stockholders
With pace of acquisitions significantly reduced, deleveraging will naturally occur
from internally generated cash flow
Selected divestitures of non-core businesses will also allow Alere to
accelerate debt pay-down, but will be balanced against the resulting
earnings dilution and potential reduction in organic growth
Will seek divestitures that create value by receiving an attractive purchase
multiple for non-core businesses that are more highly-valued by a
buyer 11
4.0x Debt to EBITDA is our target by the end of 2015
|
11/08/12
3
Quarter earnings
Note: Stock price chart reflects price appreciation only, table reflects total return. Stock
prices indexed to Alere share price. Source: Bloomberg.
Alere
Recent Strength in Stock Price Performance
Aleres stock price has increased 44% since announcing its new strategy on November 8,
2012 Since 6/28/2012
Since 11/7/2012
YTD
Alere
50.7%
44.2%
50.8%
NYSE Composite
29.9%
20.1%
15.2%
DJ US HC Index
37.8%
29.4%
27.2%
Over performance vs. NYSE Composite
20.8%
24.1%
35.6%
Over performance vs. DJ US HC Index
12.9%
14.8%
23.6%
12
$29
$27
$25
$23
$21
$19
$17
Jun-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
Jun-13
Jul-13
Alere
NYSE Composite
DJ US HC Index
rd
call: Announcement of
new strategy
Total Return Through 07/18/2013 |
Positive
Views from Analysts of New Strategy and Recent Performance
13
"In short, we believe many of the headwinds that have plagued performance over
the past 18-24 months are set to turn into significant
tailwinds
exiting
2013,
with
a
return
to
double
digit
EPS
growth
in
2014
and
2015
as
cost
cutting
initiatives
play
out,
top-line
returns
to
growth with
Triage recovery (domestic and abroad) and new products (iNat, among others), and interest
expense declines with debt reduction from non-core asset sales. While the story
is not without some risks, execution has certainly improved as of late and continued leverage on the SG&A/R&D lines and a
bounce
back
in
organic
growth
should
provide
investors
increased
confidence
that
the
turnaround,
which
is
still
early,
remains
on
track.
Raymond James on Jun 19, 2013
We
would
also
caution
against
getting
too
excited
about
the
potential
for
activist-driven
change.
We
have
seen
activists
get
involved
in the
past,
only
to
walk
away
frustrated.
While
we
understand
that
different
investors
have
different
styles
and
levels
of
persuasion,
we
suspect
that
current
shareholders
will
want
to
give
management
some
more
time
to
execute
on
its
divestiture
and
operating
improvement
strategy
before
rocking
the
boat.
Craig-Hallum on May 14, 2013
We
like
that
ALR
is
focusing
more
on
operational
efficiencies
and
balance
sheet
improvements.
The
firm
already
initiated
some
activities
such
as
moving
support
functions
to
lower-cost
regions
and
sharing
expenses.
However,
we
are
still
waiting
for
targets
to
measure
progress.
We
also like
that Health Info Solutions posted a ~2.5% YoY top-line growth rate and a positive
operating profit. Macquarie Capital (USA) on May 9, 2013
We
believe
growth
should
improve
throughout
2013
as
the
company
benefits
from
cost-cutting
measures,
R&D
optimization,
new
product
launches,
and
M&A
accretion.
Additionally,
the
hiring
of
a
COO
gives
more
credibility
into
managements
recent
discussions
surrounding
driving
more
profitable
growth
near-term
(without
large
scale
M&A).
Raymond James on Dec 12, 2012
All
emphasis
added.
Permission
to
quote
or
use
the
statements
herein
has
not
been
sought
or
obtained
from
any
party.
This
page
presents
only
brief
excerpts
from
selected
analyst
reports
and
does
not
purport
to
be
comprehensive or
to
summarize
the
entire
content
of
the
reports.
Other
analyst
reports
may
express
alternative
views.
Alere
is
not
responsible
for
the
accuracy,
completeness
or
currentness
of
the
reports,
and
the
presentation
of
these
excerpts
should
not
be
read
to
imply
adoption
or
endorsement
by
Alere
of
the
reports
or
any
views
expressed
therein.
|
Management and directors incentives are closely aligned
with stockholders
Overall beneficial ownership of our CEO as well as other
executive officers and directors is near the top of our
proxy peer group
Alere:
CEO Ownership: 5.2%
Ownership of all Directors and Officers: 8.9%
Proxy Peers (Average):
CEO Ownership: 1.7%
Ownership of all Directors and Officers: 4.3%
Aleres core executive team has driven stock price
performance of 49% since formation of the Company
(2)
Same core executive team founded and built
Inverness Medical Technology. Delivered total
stockholder return of 364% from its 1996
IPO to its
2001 sale to Johnson & Johnson for $1.3 billion
Management & BOD Ownership Near Top of Peers
Beneficial Ownership by Directors and Executive Officers
as a % of Total Shares Outstanding
4.3%
(1)
Bio-Rad
reflects
Class
A
common
shares.
Varian
Medical
Systems
CEO
ownership
equals
0.4%
of total
shares
outstanding.
Hologic,
Inc.
CEO
ownership
equals
0.5%
of
total
shares
outstanding.
Becton
Dickinson
&
Company
CEO
ownership
equals
0.5%
of
total
shares
outstanding.
Catamaran
Corporation
CEO
ownership
equals
0.3%
of
total
shares
outstanding.
Hospira,
Inc.
CEO
ownership
equals
0.1%
of
total
shares
outstanding.
(2)
From
November
23,
2001
through
July
18,
2013.
(1)
(1)
(1)
(1)
(1)
(1)
14
Hospira, Inc.
Catamaran Corporation
Becton Dickinson & Company
Hologic, Inc.
LabCorp
Varian Medical Systems
Beckman Coulter
Life Technologies Corp
C.R. Bard, Inc.
PerkinElmer
IDEXX Labs
Edwards Lifesciences
Gen-Probe Inc.
ResMed
St. Jude Medical
RehabCare Group
Myriad Genetics
Healthways, Inc.
Alere
Lincare Holdings
Bio-Rad
1.1%
0.9%
1.0%
1.1%
1.6%
2.0%
1.8%
1.6%
2.8%
2.0%
2.3%
3.3%
5.2%
3.9%
1.8%
1.4%
0.9%
1.9%
1.6%
1.6%
1.5%
1.3%
0.9%
3.1%
2.2%
1.6%
4.0%
4.7%
6.0%
12.7%
0.4%
0.5%
0.8%
1.9%
2.6%
3.7%
0.0%
5.0%
10.0%
15.0%
CEO
Other Directors and Officers
Notes:
Ownership
%
sourced
from
each
companys
most
recently
filed
proxy
except:
Beckman
Coulter
was
acquired
by
Danaher
Corporation
on
June
30,
2011.
Data
reflects
Beckmans
most
recent
proxy
filed
on
March
3,
2010.
Lincare
Holdings
was
acquired
by
The
Linde
Group
on
August
7,
2012.
Data
reflects
Lincares
most
recent
proxy
filed
on
March
26,
2012.
RehabCare
Group
was
acquired
by
Kindred
Healthcare
Inc.
on
June
1,
2011.
Date
reflects
RehabCares
most
recent
proxy
filed
on
March
23,
2010.
Gen-Probe
was
acquired
by
Hologic
Inc
on
August
1,
2012.
Gen-Probe
CEO
ownership
equals
0.7%
of
total
shares
outstanding.
Data
reflects
Gen-Probes
most
recent
proxy
filed
on
June
29,
2012.
Catalyst
Health
Solutions
was
merged
into
Catamaran
Corporation
on
July
2,
2012.
Data
reflects
Catamarans
latest
proxy. |
Aleres Independent Directors Provide Accountability
Refreshed Board Composition
Aleres slate of four non-incumbent, independent directors represents a
40% turnover in the Boards composition in a single year
Aleres declassified Board enhances accountability to stockholders
By 2015, all of the Companys directors will be elected annually
Strong independent oversight
Independent directors to increase to eight from seven
In 2012, independent directors held 10 executive sessions without management
present Select one independent director to serve as presiding director at
each session Board of Directors actively engaged in overseeing
managements execution of Aleres strategy Governance structure
and oversight practices designed to ensure management accountability 15
|
Alere
has nominated four non-incumbent directors to bring independent thinking and fresh
perspectives as Alere moves into a new phase
New nominees to take objective and hard look at Aleres strategy and employ
their breadth of experience to serve best interests of all
Alere stockholders Aleres Independent Nominees are Highly
Qualified Håkan Björklund, Ph.D.
Stephen P. MacMillan
Brian A. Markison
Sir Thomas McKillop
Healthcare
Operating
Experience
Relevant
Operating
Experience
28 years
Relevant Board
Experience
Director, Coloplast A/S,
medical device company
Chairman, H. Lundbeck A/S,
Pharmaceuticals Company
Director, Atos Medical AB,
medical device company
Former Director, Danisco A/S,
food ingredients company
24 years
Former CEO and COO of
Stryker Corp (2003
2012)
Current CEO of sBioMed
LLC, infection control
products
Various executive roles at
Johnson & Johnson and
Pharmacia
Former Director, Texas
Instruments, semiconductor
company
31 years
Lead Outside Director of
Immunomedics,
biopharmaceuticals company
Chairman, Rosetta Genomics Ltd.,
diagnostics company
Chairman, Lantheus Medical
Imaging, diagnostics imaging
agents
Director, PharmAthene, medical
countermeasures to biological and
chemical threats
Former CEO of AstraZeneca
(1999
2005)
45+ years
Chairman, Evolva Holdings
Director, Theravectys
Director, Almirall SA
Director, UCB SA
Former Director, Nycomed
Amersham plc
Former Chairman, Royal Bank
of Scotland Group
Former Director, BP plc
Former Director, Lloyds TSB
Group plc
Sold to Takeda for $13.8
billion
Former CEO of Nycomed
(1999
2011)
Various management & R&D
positions at business units of
AstraZeneca
Grew Nycomed from a small,
predominately Scandinavian
business into a major global
pharmaceutical company
Former CEO of King
Pharmaceuticals (2004
2011)
Sold to Pfizer for $3.9 billion
Manufacturer of
pharmaceuticals and medical
devices
Sold to Sandoz, a division of
Novartis
Former CEO of Fougera
Pharmaceuticals (2011-2012)
Various executive roles at Bristol-
Myers Squibb
Led merger of Zeneca plc
and Astra AB
Former CEO of Zeneca plc
16 |
Stockholders Should Have Serious Concerns About
Coppersmiths Nominees
Curt Hartman
Senior executive experience mostly as a financial officer, with CEO operating
experience limited to eight months as interim CEO; no public company board
service After
22-year
track
record
with
Stryker,
and
eight
months
as
interim
CEO,
Stryker
board
passed
over
Hartman
for
full
time
job
in
favor
of
another
internal
candidate
with
18
months
tenure
at
Stryker
Theodore Martin
Last executive position was approximately 15 years ago at a manufacturer of custom
metal parts for aerospace and industrial markets
Former family controlled company with small market capitalization (less than $500
million) when Martin became CEO
Only experience in healthcare industry is through Board-level oversight at two
public companies, as opposed to management level execution
Jerome Lande
Professional
investor
with
no
operating
experience
in
healthcare
and
no
public
company
board
experience
Coppersmith has already set forth a pre-determined agenda, which its paid
nominees will be under pressure to implement, focused on financial
engineering and short-term stock price appreciation that we believe will destroy
long-term value
17 |
Aleres Nominees Have the Right Qualifications to
Provide Independent Guidance to Our Company in
Sharp Contrast to Coppersmiths Nominees
Healthcare CEO
Experience
Public Board
Experience
Extensive CEO
Experience
Integrating
Acquisitions
Extensive CEO
Experience Driving
Growth in Foreign/
Emerging Markets
Extensive CEO
Experience Developing,
Getting FDA Approved &
Launching Medical
Products
Håkan Björklund,
Ph.D.
Stephen P. MacMillan
Brian A. Markison
Sir Thomas McKillop
Curt
Hartman
No
No
No
No
No
Theodore Martin
No
No
No
No
Jerome
Lande
No
No
No
No
No
*
Excludes
eight
months
as
interim CEO.
*
18 |
Aleres Toxicology and HIS Businesses are
Core to Our Strategy
Addictive disease diagnostics is a large part of Aleres
core chronic disease strategy
Drug misuse is a major medical problem, with ~16
million people annually using drugs for non-medical
reasons in the US alone
Alere has a strong position with 80+ drug tests and
15% market share in this $1.7 billion market
Recent developments that are driving Aleres growth in
Toxicology are:
Comprehensive program solutions for employers,
currently a $500 million market with opportunity to
grow multi-fold with expanded products and services
Differentiated offering in global reagents market with
high growth and high margin opportunity
New products for roadside testing
A sale of Toxicology would materially impact Aleres
long-term revenue and earnings growth and makes no
strategic or financial sense
Proprietary products and technologies are critical to
Aleres chronic disease strategy
Connects proprietary diagnostic devices to physicians,
hospitals, accountable care organizations
Allows for comprehensive care management
Produces better outcomes at lower costs
Business has stabilized and is on a path to sustained
profitability
Coppersmith itself suggested HIS has substantial value,
but they would still shut it down to generate a tax loss
19
Toxicology
Health Information Solutions |
Coppersmiths Plan Would Be Value Destructive
Coppersmith Proposal
Commentary
1. Sell non-core assets worth up to
$3 billion
2. Pay down debt with divestiture
proceeds
3. Rationalize Aleres expense
structure to generate cost savings
Health
Information
Solutions
and
Toxicology
are
CORE
Businesses
for
Alere
Coppersmith
on
record
that
they
would
sell
or
shut
down
Health
Information
Solutions
Coppersmiths plan is to divest and deleverage at all costs
Coppersmiths approach is value destructive and reflects a lack of understanding of
our industry and our company
Selling
profitable
businesses
and
using
net
proceeds
to
pay
down
low
cost
debt
is
extremely dilutive to earnings
Even with no tax leakage, the sale multiple must be 20x EBIT or greater to avoid
EPS dilution
Will also compromise our competitive advantage, dilute revenue growth and dilute
earnings growth
Alere outlined in Nov 2012 a strategy to simplify its corporate structure and improve
operational efficiencies to generate cost savings
Coppersmiths proposal contains few concrete ideas and mostly
reiterates what Alere has already publicly stated with only vague targets
identified and no methods for delivery provided:
Return
SG&A margins to 2010 levels
Restore
gross margins to 2010 levels
Adjust
corporate expense base following divestitures
Coppersmith believes
there are R&D savings
Alere has offered concrete steps to improve operating margins
(1)
Coppersmith letter filed 7/8/2013
20
(1) |
Coppersmith Offers No New Ideas to Generate Cost
Savings
Aleres Public Statements
Coppersmith suggests that Alere should rationalize its expense structure to generate cost
savings February 15, 2013 Earnings Call
Completing the integration and rationalization of our business
Acquisition integration
Reducing redundant headcount
May 2, 2013 Earnings Call
A high level reorganization within the company, creating a
governance structure which will better support tactical
execution and operational effectiveness
should result in improved P&L accountability
Evaluating the matrix structure to ensure it appropriately
aligns management outcomes and incentives
Creation of a global shared services team
Creating shared services team
June 27, 2013 Letter to stockholders
Aggressively relocating support functions
to lower cost environments
Relocating support functions to low cost geographies
Reduce manufacturing costs through automation and
relocation to lower cost areas
Explore lower cost [manufacturing] geographies
Increase automation and other yield improvements
Aggregate expenses and activities across multiple business
units to obtain economies of scale
Implement shared materials sourcing initiatives
to generate scale
21
Coppersmiths Ideas in July 8 Letter to stockholders
While Coppersmith has criticized Alere for half measures in this area, its own
plan has few concrete ideas that mostly mirror Aleres public statements
|
Between November 2012 and late March 2013, Alere executives had 5 meetings or
conference calls with Coppersmith or Scopia Capital
Coppersmith declined invitations for additional meetings at the JP Morgan
Healthcare Conference in January 2013, and at our office in February
2013 Coppersmith never disclosed that throughout this period its founders
owned 300 shares of Alere in total, and Scopia owned none
Coppersmith and Scopia also never expressed any concerns with Aleres
strategy On April 1, 2013, Messrs. Zwanziger and Teitel met with Coppersmith
and Scopia at Aleres headquarters and learned for the first time that
Coppersmith had concerns about the Companys strategy Alere arranged
for a follow-up call on April 11, focused on Health Information Solutions, but instead Coppersmith
informed
the
Company
on
this
call
that
it
intended
to
initiate
a
proxy
contest
with
its
own
nominees
Alere initiated another meeting with Coppersmith and Scopia on April 30, and
offered to enter into a non-disclosure agreement (NDA) to
share information at the meeting, but Coppersmith declined to sign the NDA
At the meeting, Coppersmith reiterated its position but refused to elaborate or
offer support for their views In May 2013, Coppersmith declined our
invitation to have its nominees interviewed by our Nominating and Corporate
Governance Committee, unless we agreed in advance to add its nominees to the
Board In June 2013, the parties entered into an NDA so that Alere could
disclose its new independent nominees and seek Coppersmiths support
Coppersmith indicated the Companys slate was not sufficient for them
to support, but refused to provide a counter position that they would
support Alere has been open to a constructive dialog with
Coppersmith
Throughout our dialogue with Coppersmith, Coppersmith has not been forthcoming about
their ideas or their agenda nor have they expressed interest in engaging in a
constructive dialog about building long-term stockholder value at Alere
22 |
Our
Concerns About Coppersmiths Value-Destructive Strategy Are Further
Evidenced by the Founders Poor Track Record When Board Nominees are
Elected Company
Board Member
Tenure Start Date
Tenure End Date
(1)
Total Return
(2)
Total Return
Relative to
Market Index
(3)
Total Return
Relative to
Sector Index
(4)
DHT Holdings
Robert N. Cowen
5/14/2010
Current
(88.6%)
(140.1%)
(30.5%)
Unisys Corporation
Clay Lifflander
5/20/2008
12/7/2010
(44.0%)
(35.9%)
(51.1%)
Charles McQuade
5/20/2008
5/1/2012
(58.0%)
(66.7%)
(108.3%)
Brinks Company
Carrol Wetzel &
Robert Strang
5/2/2008
5/6/2011
18.4%
(3.8%)
(2.5%)
Average
Underperformance:
(70.2%)
(47.1%)
23
Source: Bloomberg using total stockholder return including dividends and stock
splits. Board tenures from company filings. (1)
DHT
Holdings:
Robert
N.
Cowens
current
tenure
expires
in
2014;
returns
taken
as
of
June
28,
2013.
Unisys
Corporation:
Clay
Lifflander
resigned
from
the
Board
on
December
7,
2010
and
Charles
McQuade
retired
on
May
1,
2012.
Brinks
Company:
Carrol
Wetzel
and
Robert
Strang
served
adjacent
terms
on
Brinks
Board.
Carrol
Wetzel
served
beginning
on
5/2/2008
and
left
on
10/31/2008
to
serve
on
Board
of
Brinks
Home
Security
Holdings,
Inc.,
which
was
sold
to
Tyco
on
5/14/2010,
while
Robert
Strang
served
beginning
on
10/31/2008
and
left
on
5/6/2011.
(2)
Returns
from
Bloomberg
and
represents
total
stockholder
returns
including
price
appreciation,
dividends
and
stock
splits.
Unisys
Corporation
does
not
pay
a
dividend
and
therefore
Total
Return
is
price
appreciation
and
stock
splits.
Brinks
Total
Return
is
based
on
market
value
weighted
index
return
of
combined
Brinks
from
5/2/2008
to
5/6/2011
and
Brinks
Home
Security
from
10/31/2008
spin-off
from
Brink's
to
5/13/2010
close
of
sale
to
Tyco.
(3)
S&P
500
Index
is
used
as
DHT
Holdings
Market
Index
and
the
Total
Return
is
51.5%
during
Robert
N.
Cowens
tenure.
S&P
500
Index
is
used
as
Unisys
Corporations
Market
Index
and
the
Total
Return
is
(8.1%)
during
Clay
Lifflanders
tenure
and
8.7%
during
Charles
McQuades
tenure.
S&P
Midcap
400
Index
is
used
as
Brinks
Companys
Market
Index
and
the
Total
Return
is
22.2%
during
Carrol
Wetzel
and
Robert
Strangs
adjacent
tenure.
(4)
VLCC
Time
Charter
Rates
is
used
as
DHT
Holdings
Sector
Index
and
the
Total
Return
is
(58.1%)
during
Robert
N.
Cowens
tenure.
S&P
500
IT
Services
Index
is
used
as
Unisys
Corporations
Sector
Index
and
the
Total
Return
is
7.1%
during
Clay
Lifflanders
tenure
and
50.3%
during
Charles
McQuades
tenure.
S&P
Midcap
400
Commercial
Services
and
Supplies
Index
is
used
as
Brinks
Companys
Sector
Index
and
the
Total
Return
is
20.9%
during
Carrol
Wetzel
and
Robert
Strangs
adjacent
tenure.
Jerome Lande is co-founder of Coppersmith Capital. Coppersmith has no public record of any
operating activities other than its activities related to Alere
Mr. Lande previously served as a Partner of MCM Capital Management, the general partner of MMI
Investments, where he claims he was responsible for all areas of portfolio management
Since 2008, MMI obtained Board seats for its nominees at three companies following proxy contests
For 2 of these 3 investments, the stock price fell dramatically during the Board tenure of MMIs director candidates For all 3 of these
investments, stockholder returns consistently underperformed the relevant market and sector indices for
each company |
New
three-point plan as of November 2012 Focus on organic growth
Operational improvement and cost
reductions
Deleveraging via cash flow and prudent
non-core divestitures
Alere Stockholders Have a Clear Choice
Alere
Coppersmith
Strategy for
Alere
Long-term Value Creation
Director Nominees
Alignment and
Accountability
Destroys
Value
and
Ability
to
Sustain Long-term Growth
Short-term strategy focused on financial
engineering
Delever at all costs
Divest a high growth core business
Fire sale/shutdown another core business
Substantial dilution to EPS
No specific ideas for cost savings
Highly qualified healthcare CEOs
Relevant management and Board
experience to guide Alere
Independent, fresh perspective with no pre-
set agenda
No full-time healthcare CEO experience
Minimal Board experience
Pre-determined agenda by Coppersmith
Alere management aligned with stockholders
via significant ownership
Declassification of Board provides
accountability to stockholders with annual
elections
Short-term focus to detriment of long-term
value
Coppersmith not aligned with interests of all
stockholders
Coppersmith co-founder has poor track
record of stockholder value creation when
board candidates are elected
24 |
Appendix
25 |
DHT
Holdings DHT Holdings stock price has declined 91% during the tenure of
MMIs Board candidate 26
From May 14, 2010, when Robert
N. Cowen was appointed to the
Board of DHT Holdings, through
June 28, 2013, DHT stock price
declined 91%
Business Description
DHT Holdings, Inc. operates as an
independent crude oil tanker company.
The companys fleet principally
operates on international routes. The
company was incorporated in 2005 and
is headquartered in Hamilton,
Bermuda.
Key Points
Timeline of Key Events
December 3, 2009:
March 2, 2010:
with underperformance of the shares, depressed valuation, poor acquisition track
record, removal of dividend Demanded reinstatement of $0.10/share
dividend Demanded immediate addition of Robert N. Cowen to the Board of
Directors March 15, 2010:
Cowen for election to the Board of Directors
March 17, 2010:
the Board of DHT
May 14, 2010:
Investments
Board expanded from 4 to 5 members
MMI Investments terminated its proxy contest after the appointment
May 26, 2010:
March 21, 2011:
August 5, 2011:
June 25, 2012:
June 28, 2013:
MMI filed a 13D indicating an approximate 8.1% position in DHT stock
MMI Investments sent a letter to Erik Lind, Chairman of the Board of DHT Holdings,
expressing frustration MMI Investments, L.P. sent a letter to Erik A. Lind,
Chairman of the Board of DHT, nominating Robert N.
DHT declares dividend of $0.10 / share
MMI Investments filed a definitive proxy statement to solicit proxies for the
election of Robert N. Cowen to DHT Holdings appoints Robert N. Cowen to
their Board of Directors after signing agreement with MMI Cancelled SAGA
acquisition DHT announced the acquisition of a VLCC from Samsung for $67
million Removed from Russell 3000 Index
Robert N. Cowen currently serves on the board of DHT Holdings
|
DHT
Holdings (Contd) Stock price performance during tenure of MMI Board
candidate May 14, 2010:
MMI candidate Robert N.
Cowen appointed to
Board
Price: $51.24
June 28, 2013:
Current share price:
$4.48
May 26, 2010:
DHT declares dividend of
$0.10/share
Price: $49.08
March 21, 2011:
DHT announced the
acquisition of a VLCC
from Samsung for $67
million
Price: $57.00
June 25, 2012:
Removed from Russell
3000 index
Price: $7.44
August 5, 2011:
Cancelled SAGA
acquisition
Price: $38.76
September 2, 2011:
Filed shelf registration for
$300 million
Price: $33.48
Total Return
(88.6%)
(1)
(1)
Returns from Bloomberg and represents total stockholder return including price appreciation,
dividends and stock splits. 27
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
May-10
Aug-10
Oct-10
Jan-11
Mar-11
Jun-11
Sep-11
Feb-12
May-12
Jul-12
Oct-12
Dec-12
Mar-13
Jun-13
Nov-11 |
Business Description
Unisys Corporation provides
information technology (IT) services,
software, and technology that solve
mission-critical problems for clients
worldwide. It operates in two segments,
Services and Technology.
Key Points
Unisys Corporation
Unisys stock price declined 58% during the tenure of MMIs Board
candidates (1)
"Unisys CEO to step down No successor was named. Joseph W McGrath will stay until a new
chief is selected." Philly.com (2008). Web. 2 July 2013. <http://articles.philly.com/2008-09-
24/business/25247040_1_unisys-ceo-condo-tower-board-seat>.
28
Revenue declined 25% from 2008
to 2012, the years that MMI
Investments had a candidate on
the Board
November 16, 2006:
MMI Investments started accumulating ~9.9% position in Unisys Corporation (Unisys)
November 5, 2007:
MMI Investments started dialogue with Unisyss Board of Directors and Management regarding
MMIs
concerns
about
the
company,
including:
undervaluation,
strategic
configuration
and
strategic
alternatives
to
increas
e stockholder value
January 7, 2008:
MMI Investments sent letter to Board of Directors urging it to engage an investment bank to
perform
a
review
of
all
strategic
alternatives,
with
a
particular
focus
on
the
potential
realization
of
the
U.S. Government
business through a sale, tax-free spin-off or subsidiary IPO
January 23, 2008:
Unisys announced that it had postponed the date for stockholder notifications for its 2008 meeting to
facilitate discussions with MMI Investments
May 20, 2008:
MMI Investments entered into a Governance and Cooperation Agreement with Unisys, under which Unisys
appointed Clay Lifflander and Charles McQuade to Unisyss Board of Directors
September 19, 2008:
Unisys CEO Joseph McGrath resigned, under pressure from MMI Investments
October 7, 2008:
Unisyss Board elected J. Edward Coleman as Chairman of the Board and appointed him Chief
Executive Officer. J. Edward Coleman had a corporate transformation and turnaround background
November 19, 2008:
Unisys announced initiative to simplify its organizational structure and reduce operating expenses
including cutting $100 million in annual SG&A
December 4, 2008:
Unisys undertook reverse stock split in order to maintain its NYSE listing
December 22, 2008:
Unisys announced that it was taking actions to reduce annual costs by more than $225 million
January 19, 2010:
Unisys announced sale of Health Information Management business to Molina Healthcare for
$135 million
December 7, 2010:
Clay Lifflander resigned as a Director of Unisys
May 1, 2012:
Charles McQuade retired from the Board after attaining the mandatory retirement age of 70
Stock price decline of 58% during his tenure on the Board
Stock price decline of 44% during his tenure on the Board
(1)
Timeline of Key Events |
Unisys Corporation (Contd)
Stock price performance during tenure of MMI Board candidates
May 20, 2008:
MMI candidates Clay
Lifflander and Charles
McQuade appointed to
Board
Price: $44.50
May 1, 2012:
MMI candidate Charles
McQuade retires from
Board
Price: $18.71
September 19, 2008:
Joseph McGrath resigns
as CEO
Price: $33.50
November 19, 2008:
Unisys announces initiative
to cut expenses by $100
million
Price: $4.00
January 19, 2010:
Unisys announces sale of
HIM for $135 million
Price: $35.74
December 7, 2010:
MMI candidate Clay
Lifflander resigns from
Board
Price: $24.92
Total Return
(58.0%)
(1)
(1)
Returns from Bloomberg and represents total stockholder return including price appreciation,
dividends and stock splits. 29
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
May-08
Aug-08
Dec-08
Mar-09
Jul-09
Oct-09
Jan-10
May-10
Aug-10
Dec-10
Mar-11
Jun-11
Oct-11
Jan-12
May-12 |
Business Description
Key Points
The Brinks Company
Timeline of Key Events
Source: Company Filings.
(1) Total Return based on market value weighted index return of combined Brink's from
5/2/2008 to 5/6/2011 and Brink's Home Security from 10/31/2008 spin-off from Brink's to 5/13/2010 close of sale to Tyco.
(2) S&P Midcap 400 Index.
30
Since MMI Investments (MMI)
investment in Brink's:
Brinks Home Security (BHS) was
spun off in 2008
Over the time of MMI nominated
Board representation, from May 2,
2008 to May 6, 2011, Brink's stock
had a total return of 18.4%
(1)
versus the S&P Midcap 400 Index
total return of 22.2%
The Brink's Company (Brinks
or the
Company) is a leader in security-
related services including armored car
transportation, money processing, long-
distance transport of valuables and
vaulting.
February 6, 2004:
MMI
discloses
ownership
of
5.4%
in
Brinks
common
shares
via
13D
filing
April 20, 2005:
MMI writes a letter to Brink's board and says it is frustrated with Brink's poor stock performance
and suggests the company sell its Bax Global Inc. unit
November 15, 2005:
Brink's announces the sale of BAX Global Inc to Deutsche Bahn AG
for approx. $1.1B in cash
November 18, 2005:
MMI discloses it has increased its ownership of Brink's shares to 6.7%
December 18, 2006:
MMI files a presentation as a part of an amended 13D and recommends strategic alternatives such as
splitting-off a business unit or selling the Company
February 19, 2008:
MMI files proxy statement nominating four director candidates for 2008 election
Argues Brink's should split-off either the armored-car business or the home-security
business February 25, 2008:
Brink's announces board approval to spin off the Brink's Home Security (BHS) unit
Reaches agreement with MMI to expand board and nominate one of MMI's nominees as a director at the
2008 annual meeting
In addition, agrees to nominate another one of MMIs nominees to serve as a director of BHS
following the spin-off MMI withdraws its proxy filing
May 2, 2008:
Brink's appoints MMI nominee Carroll R. Wetzel, Jr., to its Board of Directors
October 31, 2008:
Brink's completes spin-off of BHS and appoints MMI nominees to each companys board
Carroll R. Wetzel, Jr., joins the board of BHS
Robert J. Strang, CEO of Investigative Management Group, appointed to Brink's board
November 17, 2010:
Brink's increases its stake in Servicio Pan Americano De Proteccion S.A. De C.V. (SPP), a
Mexico based secure logistic company, from 21% to approximately 100% for approximately $60
million May 6, 2011:
Robert J. Strangs board representation term expires as he was not nominated by the Board for
re-election The Brinks Company lagged the index
by 380 basis points during the tenure of MMIs Board candidates
(2) |
Price
($) October 17, 2008
Brinks Home Security
begins trading when
issued, spun-off on
October 31, 2008
Price: $23.50
Stock price performance during tenure of MMI Board candidates
The Brinks Company (Contd)
Oct 31, 2008:
Brink's completes spin-off of the BHS
unit and election of directors per
agreement with MMI
Carroll R. Wetzel, Jr. is switched to
BHSs board
Robert J. Strang is appointed to
Brink's board
Price: $48.49
May 6, 2011:
Robert J. Strangs term
expires as he was not
nominated by the
Board for re-election
Price: $29.85
May 2, 2008:
Carroll R. Wetzel, Jr.,
joins the board
Price: $72.00
Oct 30, 2008:
Q3 2008 earnings
announcement
Price: $46.24
Nov 17, 2010:
Brink's increases its
stake in
Servicio Pan
Americano De
Proteccion to approx.
100%
Price: $25.52
January 18, 2010
Tyco International
announces acquisition of
Brinks Home Security
Price: $31.42
Total Return
81.3%
(1)
Combined
Total Return
18.4%
(1)
Total Return
(21.0%)
(1)
Dec 17, 2008:
MMI reports stake in
Brink's reduced to
4.8%
Price: $23.50
May 14, 2010
Brinks Home Security sold
to Tyco International
Price: $42.61
(1)
Returns from Bloomberg and represents total stockholder return including price appreciation,
dividends and stock splits. 31
$72
$62
$52
$42
$32
$22
$12
May-08
Jul-08
Sep-08
Dec-08
Feb-09
May-09
Jul-09
Sep-09
Dec-09
Feb-10
May-10
Jul-10
Sep-10
Dec-10
Feb-11
May-11
The Brinks Company
Brinks Home Security
Combined Price |