$alr #arbitrage Wall Street trading desk chatter
Alere (ALR)-Being passed around a trading desk:
It seems that yesterday’s violent move down in Alere late in the day comes from a misinterpreted note from Market Securities, who has been represented to me as a London risk-arb shop. Apparently an EC meeting was highlighted and the not completed note was distributed and interpreted as negative on the deal. The company issued this mea culpa this morning which has been widely circulated among the arb community, helping ALR recover most of yesterday’s losses:
"Dear Clients - Near the close yesterday, we had an update on ALR/ABT. Before we had a chance to do our write up, we understand our competitors circulated incorrect summaries of our update.
We apologize for any confusion from our end. ===> Please let us know if you'd like a call for the full check if you haven't already received it. Thank you."
The EC concerns stem from the thought that the company buying certain assets from ALR to get the deal does not meet EC standards as an acceptable buyer. There has been NOTHING of merit written to that effect. The company, Quidel (QDEL) is a $1.1 billion market cap player in the point of care rapid diagnostics business. They are paying $400 million + a contingent $40 million for assets that produced $195 million in revenue in 2016. They are using cash on hand (current cash $175 million) and debt to finance the deal. QDEL currently has $147 million in LT debt. They will probably have about $200 million revenue this year without the Alere deal. The deal is highly accretive to Quidel. They are considered more than reputable players in the industry. They are more than acceptable buyers.
Recently Anna Pavlik of UFP, the top rated European Special Situations analyst according to Extel, recommended buying ALR:
The EC will find Quidel to be a well-qualified divestiture buyer.
Sees Quidel’s 4x post-acquisition leverage as reasonable; will not jeopardize operational viability.
Barclays was on the road with Quidel a week or so ago. CFO Randall Stewart characterized the process as being in the 7thor 8th inning, with nothing unexpected being requested.
To further assuage regulators, Abbot and Quidel have entered into a 24 month sales and service agreement to assure a smooth transition.
My conclusion-nothing has changed, and on a day when no more than 75% of the Street were on their desks, we witnessed a case of selling on no news, exacerbated by the bot traders.