Company Signs Agreement to Sell MDS Analytical Technologies to
Danaher Corporation; Plans Substantial Return of Sale Proceeds to
Shareholders; Announces Intent to Sell MDS Pharma Services TORONTO,
Sept. 2 /PRNewswire-FirstCall/ -- MDS Inc. (TSX: MDS; NYSE: MDZ), a
leading provider of products and services to the global life
sciences markets, today announced that it has entered into an
agreement to sell its MDS Analytical Technologies business, a
leading global supplier of drug discovery and life sciences
research tools, to Danaher Corporation (NYSE:DHR) for $650 million
in cash, and that it currently intends to return approximately $400
million to $450 million of the sale proceeds to its shareholders.
The completion of the sale is subject to shareholder and regulatory
approval, and other closing conditions. The Company also announced
that it intends to sell its MDS Pharma Services business, a leading
provider of innovative drug discovery and early-stage development
solutions for pharmaceutical and biotechnology companies. Upon
completion of these transactions, the Company would be focused
solely on its MDS Nordion business, which is a leading provider of
medical isotopes for molecular and diagnostic imaging,
radiotherapeutics and sterilization technologies. These decisions
follow a comprehensive strategic review by a Special Committee of
independent Directors working with Management and financial and
legal advisors. The MDS Inc. Board of Directors believes the
actions announced today are in the best interests of the Company
and its shareholders, and unanimously recommends that shareholders
vote in favor of the sale of MDS Analytical Technologies. "The
Board and Executive Management Team believe the proposed path
forward provides the greatest opportunity to unlock the value of
MDS businesses in the near-term and enables a substantial return of
proceeds from the sale of the MDS Analytical Technologies business
to shareholders," said James S. A. MacDonald, Chairman of MDS
Inc.'s Board of Directors. Goldman, Sachs Co. has provided an
opinion to the Board of Directors of MDS Inc. to the effect that
the consideration to be paid to the Company for the MDS Analytical
Technologies business pursuant to the Sale Agreement is fair, from
a financial point of view, to the Company. In addition, Blair
Franklin Capital Partners Inc. has provided an opinion that the
consideration being received by the Company pursuant to the sale of
the MDS Analytical Technologies business is fair, from a financial
point of view, to the Company's shareholders. "The economic
downturn and the prolonged shutdown of Atomic Energy of Canada
Ltd.'s (AECL) National Research Universal (NRU) reactor have
created significant challenges for our businesses that contributed
to this course of action," said Stephen P. DeFalco, President and
Chief Executive Officer of MDS Inc. "During this process, our MDS
Pharma Services and MDS Analytical Technologies businesses will
remain focused on delivering exceptional service to customers. MDS
Nordion will remain focused on innovation and on building its
market leadership in the provision of medical isotopes for
molecular and diagnostic imaging, radiotherapeutics and
sterilization technologies." MDS Analytical Technologies Under the
terms of the agreement, Danaher will acquire the MDS Analytical
Technologies business, which includes approximately 1,100 employees
operating in 10 countries. Under a separate arrangement, Danaher
has agreed to purchase the portion of the Applied Biosystems/MDS
Analytical Technologies mass spectrometry joint-venture partnership
held by Life Technologies Corporation. Completion of each
transaction is conditioned on the concurrent closing of the other
transaction. When completed, these transactions will create a fully
integrated, industry-leading, global mass-spectrometry business. In
combination with MDS Analytical Technologies' Drug Discovery and
Bioresearch product lines, this newly integrated business will
serve customers with an award-winning product line. MDS is
committed to working with Danaher, a strong company with a track
record of successful acquisitions, to achieve a smooth and timely
transition for customers and employees. To approve the sale of MDS
Analytical Technologies, a Special Meeting of Shareholders is
expected to be held in October 2009. The sale must be approved by
two-thirds of the votes cast at the meeting. MDS anticipates that a
management proxy circular for the shareholder meeting will be
mailed to shareholders later this month and will be available at
http://www.sedar.com/, http://www.sec.gov/edgar.shtml and
http://www.mdsinc.com/. The transaction is expected to close in the
fourth calendar quarter of 2009. Proceeds from the Sale Upon
completion of the sale of the MDS Analytical Technologies business,
MDS currently intends to return approximately $400 million to $450
million of the sale proceeds to shareholders by way of a share
buyback through a Substantial Issuer Bid. The Company currently
intends to initiate a Substantial Issuer Bid within 30 days
following completion of the sale of its MDS Analytical Technologies
business. MDS also expects to use a portion of the proceeds,
together with existing cash on hand, to retire all outstanding
senior unsecured notes, pay transaction and restructuring costs and
fund ongoing operations of the remaining business. MDS Pharma
Services MDS also announced that it is actively seeking a buyer for
its MDS Pharma Services business, which is focused on Early Stage
operations (Discovery through Phase IIa). MDS Pharma Services is a
leader in molecular screening and profiling, has strength in
bioequivalence and bioanalysis studies, and has one of the largest
Phase I bed capacities in the industry. A sale of the MDS Pharma
Services business is expected to provide opportunities to build
market leadership and to position the business to better serve
global customers in an increasingly competitive contract research
market. As previously announced on June 1, 2009, MDS continues to
seek a buyer for its Central Labs business. Subsequent to the
completion of a sale of the MDS Pharma Services business, the
Company anticipates it would distribute a portion of the sale
proceeds to shareholders. There can be no assurance that MDS will
complete a transaction involving MDS Pharma Services. If MDS
determines that there is not an acceptable transaction for MDS
Pharma Services, it intends to retain and invest in building the
business. MDS Nordion As a stand-alone business, MDS Nordion will
continue to focus on building its core strengths and leadership
position in providing medical isotopes for molecular imaging,
radiotherapeutics and sterilization technologies. Despite the
current shutdown of AECL's NRU reactor, MDS Nordion continues to
deliver positive adjusted EBITDA and cash flow from sterilization
technologies and radiopharmaceuticals. MDS Nordion's goal is to
remain an innovative market leader delivering strong financial
performance. Assuming completion of the sale of MDS Analytical
Technologies and MDS Pharma Services, MDS will remain as a publicly
traded entity consisting solely of the MDS Nordion business. The
Company will continue to review its operational requirements and
intends to take appropriate action to reflect the scope and
complexity of MDS following the completion of these transactions.
MDS Inc. Third Quarter 2009 Outlook In the third quarter, MDS Inc.
will begin reporting MDS Pharma Services Late-Stage operations as
discontinued operations to reflect the previously announced
decision to divest Late-Stage operations and to focus MDS Pharma
Services on the delivery of Early-Stage services only. As a result,
MDS has revised prior periods and expects to report second quarter
results from continuing operations as net revenues of approximately
$208 million and adjusted EBITDA of approximately $29 million,
versus previously reported results for net revenues and adjusted
EBITDA of $257 million and $31 million, respectively. For the third
quarter of 2009, MDS expects to report net revenues in the range of
$190 million to $195 million and adjusted EBITDA in the range of $5
million to $10 million from continuing operations. Third quarter
results were negatively impacted by further softening in customer
demand for Phase I services as customers continue to reprioritize
their research-and-development pipelines in relation to economic
pressures, pharmaceutical company mergers, reduced biotech funding
and customer concerns regarding uncertainties created by the
Company's strategic review process. In addition, results for the
quarter were negatively impacted by the unexpected shutdown of
AECL's NRU reactor. As previously announced, the NRU outage reduces
adjusted EBITDA by approximately $4 million per month. MDS also
expects to report third quarter 2009 cash flow in the range of $52
million to $57 million, including $35 million of proceeds related
to the sale of Phase II-IV operations which closed on July 1, 2009.
The Company's cash balance at July 31, 2009 is expected to be in
the range of $295 million to $300 million. The strategic
repositioning actions announced today will be treated as a
subsequent event for financial reporting purposes in the third
quarter of 2009. Conference Call MDS will hold a conference call
today at 8:00 a.m. EDT to discuss this morning's announcement. The
call will be Webcast live at http://www.mdsinc.com/ and will also
be available in archived format at
http://www.mdsinc.com/investors/webcasts_presentations.asp after
the call. Advisors In connection with the transaction, Goldman,
Sachs Co., and RBC Capital Markets are acting as financial advisers
to MDS, and Blair Franklin Capital Partners Inc. are acting as
financial advisers to MDS's Board of Directors. Skadden, Arps,
Slate, Meagher Flom LLP and Fasken Martineau DuMoulin LLP are
acting as legal counsel to MDS. In addition, Goodmans LLP is acting
as legal counsel to MDS's Board of Directors. Sale Agreement The
full text of the Sale Agreement for the sale of the MDS Analytical
Technologies business will be available shortly at
http://www.sedar.com/ and http://www.sec.gov/edgar.shtml.
Transaction Conditions The transaction is subject to various
conditions to closing, including the affirmative vote of at least
66 2/3% of the shareholders casting votes on the transaction,
regulatory approvals, the concurrent closing of the Life
transaction and other customary closing conditions. In addition,
the Company has the right to terminate the Sale Agreement if, among
other things, holders of more than 15% of the Company's outstanding
common shares have validly exercised their dissent rights in
respect of the sale. The Board of Directors of MDS has agreed that
it will not solicit or initiate discussions or negotiations with
any third party concerning any business combination or other
material transactions involving MDS Inc. and its subsidiaries
(other than transactions involving MDS Pharma Services and/or MDS
Nordion, that do not involve any assets of the MDS Analytical
Technologies business and that do not adversely affect the
consummation of the transactions contemplated by the Sale
Agreement). However, under the Sale Agreement, the Board of
Directors has the right to respond to unsolicited proposals for the
acquisition of all or substantially all of the assets or capital
stock of MDS Inc. and/or the MDS Analytical Technologies business,
all subject to the terms of the Sale Agreement. If the Board
determines, among other things an alternative transaction is more
favorable, from a financial point of view, to the Company's
shareholders, the Board is entitled to change its recommendation to
shareholders, subject to Danaher's right to make a revised proposal
with respect to the acquisition of the MDS Analytical Technologies
business and the obligation of the Company to hold the meeting and
allow shareholders to vote on the sale of the MDS Analytical
Technologies business to Danaher. In certain circumstances in which
the Sale Agreement is terminated, including in the event that the
Board adversely changes its recommendation with respect the sale of
the MDS Analytical Technologies business to Danaher, the Company is
required to pay to Danaher a termination fee of 4% of the
consideration being offered by Danaher for the acquisition of the
MDS Analytical Technologies business. The foregoing description is
subject entirely to the terms of the Sale Agreement. About Danaher
Corporation Danaher is a leading manufacturer of Professional
Instrumentation, Medical Technologies, Industrial Technologies and
Tools and Components (http://www.danaher.com/). About MDS Inc. MDS
Inc. (TSX: MDS; NYSE: MDZ) is a global life sciences company that
provides market-leading products and services that customers need
for the development of drugs and diagnosis and treatment of
disease. MDS Inc. is a leading global provider of pharmaceutical
contract research, medical isotopes for molecular imaging,
radiotherapeutics, and analytical instruments. MDS has more than
4,200 highly skilled people in 13 countries. Find out more at
http://www.mdsinc.com/ or by calling 1-888-MDS-7222, 24 hours a
day. Caution Concerning Forward-Looking Statements This document
contains forward-looking statements, including statements with
respect to the proposed sale of the MDS Analytical Technologies
business, the proposed use of proceeds from the sale, the strategy
of the remaining business and the Company's intention to sell other
assets of the Company. Some forward-looking statements may be
identified by words like "expects", "anticipates", "plans",
"intends", "indicates" or similar expressions. The statements are
not a guarantee of future performance, and are inherently subject
to risks and uncertainties. MDS's actual results could differ
materially from those expressed in the forward-looking statements
due to these risks and a number of other factors, including, but
not limited to, successful implementation of structural changes,
including restructuring plans, acquisitions and divestitures
including the proposed sale of the MDS Analytical Technologies
business, technical or manufacturing or distribution issues, the
competitive environment for MDS's products and services, the degree
of market penetration of its products and services, the ability to
secure a reliable supply of raw materials, the impact of our
clients' exercising rights to delay or cancel certain contracts,
the strength of the global economy, the stability of global equity
markets, the availability and cost of financing, the impact of the
movement of the U.S. dollar relative to other currencies,
particularly the Canadian dollar and the euro, uncertainties
associated with critical accounting assumptions and estimates, and
other factors set forth in reports and other documents filed by MDS
with Canadian and U.S. securities regulatory authorities from time
to time, including MDS's quarterly and annual MD A, Annual
Information Form, and Annual Report on Form 40-F for the fiscal
year ended October 31, 2008, filed with the U.S. Securities
Exchange Commission. Use of Non-GAAP Financial Measures Non-GAAP
measures, including terms such as net revenue, adjusted EBITDA,
adjusted EPS, new orders and backlog, are used to explain the
operating performance of the Company. These terms are not defined
by GAAP, and MDS's use may vary from that of other companies. MDS
uses certain non-GAAP measures so that investors and analysts have
a better understanding of the significant events and transactions
that have had an impact on results, or may have an impact on MDS's
financial outlook. MDS provides a description of these non-GAAP
measures and a reconciliation of these non-GAAP measures for actual
results to GAAP financial results in its MD A and Annual Report.
DATASOURCE: MDS Inc. CONTACT: MEDIA: Janet Ko, (905) 267-4226, ;
INVESTORS: Kim Lee, (905) 267-4230,
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