Under pressure MDS may sell off divisions
The company had a challenging 2008, with its contract services division MDS Pharma Services posting an operating loss of $353m (€273m). This was up from a loss of $122m in 2007 and the other units faired little better, with the company as a whole recording a loss of $693m.
These losses have dismayed some investors, who have seen peer contract research organisations’ (CRO) share price increase by 20 per cent a year while MDS has increased less than two per cent.
To resolve these difficulties Obrem Capital Management, which owns over five per cent of MDS’ shares, urged the company to sell at least one of its business units.
MDS is made up of three business units, which provide contract research services, laboratory equipment and medical isotopes, but Obrem believes this structure is detrimental to shareholder value.
In a Securities and Exchange Commission filing Obrem called for MDS to sell or spin off one or more of its divisions because the company “is comprised of three fundamentally attractive business units that do not belong together”.
The formation of the special committee suggests the company is listening to criticisms that it is failing to provide value to shareholders but this will not necessarily be realised by selling assets.
In a statement the company said: “The focus of the review is on assessing strategic alternatives. 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.”
