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.
The pressure for a split-up of MDS assets has come mainly from Obrem Capital Management LLC, a US hedge fund that owns about 6.6 per cent of the stock. Last year Obrem began to pressure MDS to split itself up, saying the company included "three fundamentally attractive" businesses that don't belong together.
Towards the end of the year it had become impatient and threatened to call a shareholders meeting to shake up the board. However in November, Obrem signed an agreement with the company in which it agreed not to start a proxy battle or try to break up the company until the day after MDS's annual meeting on March 12.
Since Obrem first made its breakup proposal last year, both the markets and MDS's financial results have deteriorated. MDS has taken large writedowns at the Pharma Services division and it is now in a legal dispute with Atomic Energy of Canada Ltd over the nuclear reactors that produce medical isotopes.
Last summer, Obrem estimated that the three MDS businesses would sell for a total of more than $2.5-billion. But in a report yesterday, TD Newcrest analyst Lennox Gibbs said the group is now worth less than $1.4-billion.