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Hedge Fund Ups Pressure on MDS, Urges Analytical Technologies Divestiture

NEW YORK (GenomeWeb News) – Obrem Capital Management has publicly released a letter that it sent to the management and board of directors of MDS reiterating its belief that the firm should explore a spinoff of certain businesses, among other measures to increase shareholder value.
 
The letter, which was sent today, follows a similar suggestion made by the hedge fund, which is among MDS’ five largest shareholders, in April that the company hire an advisor to seek the sale of certain business units.
 
Obrem said in its letter that it has engaged in numerous discussions with the management and board of MDS over the past several months, and even though company representatives have been “willing to listen to our views … we have been disappointed with the lack of action in response to our recommendations.”
 
Specifically, Obrem has recommended MDS seek to sell off certain assets, commence a significant share repurchase program, and members of management and the board should increase ownership of MDS stock to align their interests with the shareholders.
 
“It would likely be difficult to sell the entire company to a single strategic buyer for the simple reason that this collection of assets does not belong together in the first instance,” Obrem Capital Founder Andrew Rechtschaffen said in the letter. “Our preference would be to see an expeditious sale of some combination of the legacy Sciex business, the Molecular Devices business, and the pieces of MDS Pharma Services, followed by a spinoff of MDS Nordion.”
 
He added, “Our belief is that the easiest group of assets to divest would be those in MDS Analytical Technologies, which we think would attract numerous potential buyers, including several who already know the assets well.”
 
Rechtschaffen added that Obrem is opposed to MDS acquiring the other half of the Sciex joint venture, which is held by Applied Biosystems. There has been speculation in the industry and among investors about whether Applied Biosystems would keep the Sciex business following its merger with Invitrogen next month.
 
Obrem also said that it is mulling calling a special meeting of shareholders, which would address the removal of one or more longstanding MDS board members and a shareholder vote on pursuing the actions it outlined in the letter.
 
MDS’ shares closed up nearly 7 percent at $9.88 on the New York Stock Exchange.
 

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