MDS to Sell Diagnostics Business to Borealis Infrastructure Management in $1.3B Transaction
05 October 2006 - 10:00PM
PR Newswire (US)
Important Milestone in Executing Global Life Sciences Strategy
TORONTO, Oct. 5 /PRNewswire-FirstCall/ -- MDS Inc. (TSX:MDS; NYSE:
MDZ), a global life sciences company, announced today a new chapter
in the Company's history as it signed an agreement to sell its
Canadian laboratory services business, MDS Diagnostic Services, to
Borealis Infrastructure Management Inc. in a CAD $1.325 billion
transaction. This strategic sale is designed to shift the company's
business focus to the life sciences market. Under this agreement,
Borealis Infrastructure Management, an investment entity of Ontario
Municipal Employees Retirement System (OMERS), one of Canada's
largest pension plans, will acquire MDS Diagnostic Services,
Canada's largest provider of laboratory services, with annualized
revenues of CAD$335 million and over 2,900 employees. This sale is
pivotal to the strategy that MDS has been executing since last
September. This strategy also included streamlining its cost
structure to be more competitive and selling non strategic assets.
"The sale of our diagnostics business represents a major milestone
for MDS in the transition to a global life sciences company," said
Stephen P. DeFalco, President and Chief Executive Officer, MDS Inc.
"We will be able to focus exclusively on life sciences markets,
where incredible advances are being made to diagnose and treat
diseases. This agreement represents a great outcome for our
shareholders, our employees and the customers we serve." "We see an
exciting future for this business," said Michael Rolland, Senior
Vice President of Borealis Infrastructure. "We look forward to
working with the talented professional staff at MDS Diagnostic
Services to ensure that they continue to lead the industry in the
delivery of laboratory services that support the healthcare needs
of Canadians." From the total transaction price of CAD$1.325
billion, MDS expects to realize net proceeds of approximately
CAD$1.052 billion, after provision for taxes, expenses and amounts
attributable to minority interests. A portion of the purchase price
may be retained for up to 18 months, contingent on the satisfaction
of specific transition obligations of MDS. This transaction is
subject to conditions and customary approvals, including regulatory
consents and approval from the shareholders of LPBP Inc., the
limited partner of the entity that owns the assets used in the
Ontario Laboratory Business. The transaction is expected to close
by the end of January 2007. MDS has been advised by RBC Capital
Markets and UBS Securities on this transaction. Following the
completion of this transaction, MDS intends to make a number of
changes to its capital structure. MDS plans to use CAD$500 million
of the proceeds to fund a one-time share buyback, subject to
regulatory approval. In keeping with the practices of its life
sciences peers, MDS will discontinue the payment of its quarterly
dividend. In addition, MDS intends to invest the remainder of the
proceeds in growing its market-leading life sciences businesses.
The company also expects to convert to US$ reporting in the first
quarter of 2007 and to US GAAP reporting over the course of fiscal
2007. MDS has market-leading franchises in drug discovery
instruments, molecular imaging, radiopharmaceutics and contract
research services for pharmaceutical and biotech clients. These
businesses provide products and services to enable the development
of new drugs and diagnostics as well as the diagnosis and treatment
of disease. As a company with US$1 billion in life sciences
revenues, following this transaction MDS expects to generate 95
percent of its revenues from global markets by the end of this
fiscal year. The strengthened focus on life sciences should enable
the company to generate higher growth rates in the markets in which
the company's three business units operate. For example: - MDS
Sciex, a leading provider of analytical instruments, operates in a
market with an 8% - 11% growth rate annually. - MDS Nordion, a
leading provider of medical isotopes and leading developer and
manufacturer of radiotherapeutics, does business in a market with a
5% - 8% annual growth rate. - MDS Pharma Services, a leading
provider of early stage drug development services and the 6th
largest global contract research organization, operates in a market
with a 10% - 14% annual growth rate. An analyst and institutional
investor conference call will be held at 10 am EST this morning,
October 5th, to discuss this announcement. The call will be webcast
live at http://www.mdsinc.com/. A recording of the conference call
will be available at
http://www.mdsinc.com/news_events/webcasts_presentations.asp or by
calling 416-695-5800 and entering access code 3196593. This press
release contains forward-looking statements (within the meaning of
applicable securities' legislation including the U.S. Private
Securities Litigation Reform Act of 1995) relating to the proposed
sale by MDS of its diagnostic business, the intended use of
proceeds, such as share buybacks and the cessation of dividends by
MDS following the completion of the transaction and the ability of
MDS to generate future growth. Words such as "expects", "will",
"should", "plans" and "intends" are intended to identify these
forward-looking statements. These forward-looking statements are
based on estimates and assumptions made by MDS in light of its
experience and its perception of historical trends, current
conditions and expected future developments, as well as other
factors that MDS believes are appropriate in the circumstances.
There are a number of risks, uncertainties and other factors that
could cause (i) the proposed sale not to occur or not to occur
within the expected period; (ii) MDS to use the proceeds in a
different manner than expected; (iii) MDS to not execute a share
buyback or continue paying quarterly dividends or (iv) future
growth rates in the Company's remaining businesses to be adversely
affected or to be less than historical growth rates. These factors
include, without limitation, MDS's ability to obtain the requisite
regulatory and other approvals and to comply with the closing
conditions to the transaction, some of which are beyond MDS's
control; changes in market economic or regulatory conditions or
liquidity needs that make it inadvisable or impractical to conduct
a share buyback or change dividend policies or that adversely
impact future growth rates; many of which are beyond MDS's control.
Risk factors relating to MDS's business, as discussed in greater
detail in the "Risk Factors" section of MDS's Annual Information
Form or in its Management Discussion and Analysis included in its
Annual Report on Form 40-F (copies of which filings may be obtained
at http://www.sedar.com/ or http://www.sec.gov/) should be
considered carefully, and readers should not place undue reliance
on MDS's forward-looking statements. MDS has no intention and
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. About MDS Inc. MDS Inc. (TSX: MDS; NYSE: MDZ) is a
global life sciences company that provides market-leading products
and services that our customers need for the development of drugs
and diagnosis and treatment of disease. We are a leading global
provider of pharmaceutical contract research, medical isotopes for
molecular imaging, radiotherapeutics, and analytical instruments.
MDS has more than 8,800 highly skilled people in 28 countries. Find
out more at http://www.mdsinc.com/ or by calling 1-888-MDS-7222, 24
hours a day. MDS Diagnostic Services, a business unit of MDS Inc.
(TSX: MDS, NYSE: MDZ), is a leading provider of laboratory testing
and management services. About Borealis Infrastructure Management
Inc. Borealis Infrastructure identifies, invests in and manages
OMERS infrastructure assets, which provide competitive and stable
rates of return over a long investment horizon. In the business
since 1998, Borealis is a global leader in infrastructure
investing, with assets in energy, transportation, infrastructure
buildings, including long-term care facilities and hospitals,
pipelines and telecommunications. Visit the Borealis Infrastructure
website at http://www.borealisinfrastructure.com/ for more
information. OMERS is one of Canada's largest pension plans, with
more than $41 billion in assets. It provides retirement benefits to
365,000 members on behalf of 900 local government employers across
Ontario. Visit the OMERS website at http://www.omers.com/ for more
information. DATASOURCE: MDS Inc. CONTACT: Investors: Sharon
Mathers, Vice-President, Investor Relations and External
Communications, MDS Inc., (416) 675-6777 x 4721, ; Media: Catherine
Melville, Director, External Communications, MDS Inc., (416)
675-6777 x 2265, ; Michael Rolland, Senior Vice President, Borealis
Infrastructure, (416) 361-1011, ; Debbie Oakley, Senior Vice
President, Corporate Affairs Division, OMERS (416) 369-2402,
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