Coppersmith Presentation to Alere Inc Stockholders
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COPPERSMITH
"What Coppersmith has mistakenly ignored, is that divesting profitable businesses and using the net proceeds to pay down
low-cost debt is dilutive to earnings, unless the sale price is at exceedingly high multiples of cash flow." - Chairman and CEO
Zwanziger's Letter to Stockholders, 6/27/13
▪ This logic suggests a startlingly unsophisticated approach to capital allocation and basic finance
> Implies everything with a ROIC above 5% (Alere's current average interest rate) is worth buying or keeping
> Alere has executed 107 acquisitions, a deal-a-month pace for ten years
What Is Alere's Analytical Framework For Its Capital Structure?
> Implies nothing should be sold until rates rise, shifting accretion/dilution analyses, but dampening valuation multiples
> Alere has executed one outright sale of reportable size in its history (Nutritionals, $63mm)
> Implies leverage should be limited only by the availability of low-cost debt, and assets that yield just marginally more
> A rational strategic M&A program should not be treated like a Wall Street 'carry trade'
How can Alere justify having 6.0x leverage, $2.4B of debt at floating rates and over $3B of
debt due within five years, and not even have a Finance Committee of the Board?
How do you allocate capital and manage risk when you think your cost of debt is your cost of
capital?View entire presentation