UPDATE: Alere Reiterates Commitment To Unlock Shareholder Value
Alere Inc. (NYSE: ALR) (the "Company" or "Alere"), a global leader in enabling individuals to take charge of their health at home through the merger of rapid diagnostics and health information solutions, today announced that on June 26, 2013 it filed and commenced mailing of its definitive proxy materials in connection with the Company's 2013 Annual Meeting of Stockholders, to be held on August 7, 2013, with the Securities and Exchange Commission ("SEC"). Alere stockholders of record at the close of business on June 14, 2013 will be entitled to vote at the 2013 Annual Meeting. The Alere Board of Directors recommends stockholders vote "FOR" Alere's new independent nominees: Hakan Bjorklund, Stephen MacMillan, Brian Markison and Sir Thomas McKillop, as well as the other proposals contained in the definitive proxy materials.
In support of its new independent nominees, Alere issues the following letter to its valued stockholders:
June 27, 2013
Dear Fellow Alere Stockholder:
As part of our ongoing efforts to build stockholder value, Alere's Board of Directors is pleased to nominate four outstanding senior executives, Hakan Bjorklund, Stephen MacMillan, Brian Markison and Sir Thomas McKillop, for election as directors at our 2013 Annual Meeting of Stockholders on August 7. The nominees, all of whom we expect to qualify as independent directors under applicable NYSE rules, would take seats previously filled by three independent directors and one director who is a senior executive officer of Alere.
All four of your Board's nominees are current or former Chief Executive Officers of major healthcare companies with significant operating experience. The nominees were recommended by your Board's Nominating and Corporate Governance Committee after a lengthy and extensive review process involving the assistance of a premier executive search firm. We are confident that each of these nominees will draw upon their experience as chief executives of diverse and complex global organizations to contribute significantly to your Board's expertise and oversight of Alere's corporate strategy through the next stage of our growth and development.
ALERE IS EXECUTING A COMPREHENSIVE PLAN TO UNLOCK STOCKHOLDER VALUE
While acquisitions have been a crucial part of our strategy to build our company to the global scale, product breadth, and market leadership we now have, this phase of our development is now substantially complete. Our focus is now on internally improving our organic revenue growth and our operating margins.
In November of last year, Alere's Board and management team presented to our stockholders a three-point plan to drive higher operating margins and increase free cash flow and earnings growth.
We believe that our plan has been well-received by investors and the plan is already gaining traction. Alere's stock price has increased approximately 28% since November 7, 2012, the last trading day prior to our communicating the new strategy, as compared to returns during the same period for the S&P 500 index of 15%. We believe that we are poised to unlock significant additional stockholder value and that our valuation will continue to improve from significant earnings growth that will come from our focus on organic revenue growth, improving operating margins and applying excess free cash flow to debt reduction.
Our three-point plan to unlock stockholder value consists of:
Deliverable: Re-establish historic organic revenue growth rates through a combination of growth in existing businesses, new product launches and further penetration of new geographic markets.
Actions taken or underway:
Existing businesses: In the near term, we expect our organic growth rate to accelerate as we (i) overcome Triage related manufacturing capacity constraints and begin the process of recapturing our customers, (ii) expand revenue from our toxicology products as pricing adjustments made in early 2012 have been in place for over one year and (iii) expand in diabetes sales with our positioning as a low-cost provider. New product launches: We continue to drive growth through recent and near term product introductions such as our (i) CD4 Analyzer, (ii) Alere Q and Alere I molecular diagnostic tests for HIV, HCV, TB and flu and other infectious diseases and (iii) epoc Blood Analysis System, which provides caregivers with wireless communication and real-time lab-quality blood gas, electrolyte, and metabolite results at the patient bedside. Under-penetrated markets: We continue to expand in key markets in Asia, Latin America and Africa, where we remain underpenetrated. Deliverable: Simplify our corporate structure and improve operational execution to generate dependable, long-term cash flow.
Actions taken or underway:
We are standardizing key business processes and globalizing shared services, in order to aggregate expenses and activities across multiple business units to obtain economies of scale. We are aggressively relocating support functions to lower-cost environments such as the Philippines and continuing our ongoing efforts to reduce manufacturing costs through automation and relocation to low cost areas. We recently appointed Namal Nawana, a former 15-year executive at Johnson & Johnson, with global operational experience in integrating large, complex acquisitions to the newly created position of Chief Operating Officer and have given him the mandate to improve on our execution. Deliverable: Utilize excess cash flow from operations, a reduced acquisition pace and divestitures of non-core operations to support deleveraging to at least 4.0x Debt to EBITDA by the end of 2015.
Actions taken or underway:
We are engaged in active and ongoing discussions with multiple parties concerning the divestiture of several non-core businesses. Our actions are consistent with our historical practice of continually analyzing our business to evaluate prudent divestitures of non-core assets. Past transactions include our divestiture of our Nutritionals business in 2010 and the formation of our consumer products joint venture with Procter & Gamble in 2007. In evaluating any future divestitures, our Board believes that a balance must be maintained between paying down debt and incurring excessive earnings dilution or diminishing our organic growth rate. Cash flow generation and earnings growth in our core businesses have already improved, and with the pace of acquisitions significantly reduced, deleveraging will naturally occur from internally generated cash flow.
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