In the wake of a bitter proxy fight, diagnostics leader Alere ($ALR) revealed plans to trim off some its noncore businesses, planning an IPO for the spinoff in an effort to keep its promise to investors worried about the company's mounting debts.
The sale of 25% of subsidiary BBI Diagnostics Group in a future IPO appears consistent with promises that activist investor Coppersmith Capital Management said it secured after an unsuccessful effort to nominate three board members to Alere's board. Coppersmith wanted Alere to sell off some of its businesses for about $4 billion in a bid to pay down the firm's debt; now Alere's management--though intact--says it will use the proceeds from the sale of BBI debt and stock do just that.
Alere said BBI shares will debut on the Main Market of the London Stock Exchange. In addition, Alere will concurrently create a new debt facility within the subsidiary. The IPO's pricing and amount of BBI debt to be issued have yet to be determined, according to an Alere statement.
Alere CEO Ron Zwanziger said in a statement that BBI's lines "of business are non-core to our focus on point-of-care products for the diagnosis and management of chronic disease. The transaction will allow Alere to deliver on its commitment to reduce debt through divestitures of selected non-core assets."
BBI sells the reagents used in diagnostic tests, laboratory immunoassays, home fertility and test products and animal health diagnostics, according to the statement. It will apply to the United Kingdom Financial Conduct Authority for deal approval, Alere said. At current pound-dollar exchange rates, BBI earned a profit of $30.1 million on revenues of $146.3 million in 2013, according to the company.
Reached by phone, Coppersmith co-founder Jerome Lande declined to comment on the deal.
But he wasn't so quiet following his loss in the proxy fight. "The extraordinary commitments we believe (Alere) management made to secure a last-second victory make it clear that the clock is ticking for performance and accountability at Alere," he wrote in August.
Zwanziger said in his statement that Alere "may sell additional shares of BBI Diagnostics over time, which would allow us to continue to pay down debt with any proceeds," though he expects to maintain a majority interest for the foreseeable future.
The company also reported its earnings Tuesday, posting a loss of $11.5 million in the first quarter on revenues of $716.6 million. Net debt stood at $3.4 billion.
Alere shares fell slightly to about $34 on the news as of midday.
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