Troubled MDS may sell of divisions

03 February 2009

MDS Inc has named an independent committee to look at alternatives to boost shareholder value, as speculation grows that it is mulling the possible spin-off of some of its units. The Canadian life sciences conglomerate, which specialises in analytical instruments, molecular imaging and contract research, said the four-member committee includes Gregory Spivy, a partner at activist fund ValueAct Capital Partners LP, MDS's largest shareholder with about a 20 per cent stake.

The company has been under pressure from some shareholders to sell off its parts. But MDS, which lost $575-million in its most recent quarter and whose stock has fallen more than 46 per cent in the past year, cautioned that there may be no sale of assets or any other transaction after the review.

Its statement noted that "there can be no assurance that this process will result in any specific strategic or financial transaction - especially given the uncertain market and economic conditions."

The special committee, made up of independent directors, will "review alternatives to improve shareholder value," the statement said. A company spokeswoman refused any comment about its specific mandate beyond saying that it would "look at all possible scenarios". She added that no timetable had been set for a decision.

MDS is made up of three main businesses - MDS Pharma Services performs contract research, MDS Analytical Technologies makes laboratory equipment, and MDS Nordion sells medical isotopes. The latest move is refuelling speculation that MDS could split into three separate divisions - a plan backed by some shareholder groups. But some analysts also said this may be a bad time to try to sell any of MDS's divisions.

MDS also said it hired Goldman, Sachs & Co and RBC Capital Markets as financial advisers.