A New York hedge fund is pressing MDS to sell MDS Nordion, predicting the sale of the medical isotope producer would generate $1 billion.
According to The Ottawa Citizen, Obrem Capital Management, which recently took control of 7.5 percent of MDS stock in a bid to shake up operations, said shareholders are being "scared off by problems and poor execution" in two of the three major divisions of the company, including Nordion.
Obrem said that since new management took over three years ago, MDS shares have risen an average of about 2 percent annually. Shares of competing companies have risen an average of 22 percent in the same period. Obrem said action is necessary following disappointing results in the latest quarter.
Obrem said that the expected revenues from the sale should be used to repurchase MDS stock, reported The Ottawa Citizen.
The Ottawa-based Nordion operation, which makes medical isotopes that are distributed globally, faces challenges over future supplies of feedstock from Atomic Energy of Canada Limited (AECL) recently cancelled work on troubled replacement reactors. The 50-year-old reactor at Chalk River, long scheduled for closure, will have to be granted an extended operating license.
Obrem said it believes Nordion would still sell for $800 million based on the conservative assessment that the AECL license is extended only through 2016 and that Nordion has made no attempt to replace the feedstock.
According to The Ottawa Citizen, MDS said it is reviewing the new Obrem filing and declined further comment.