Independent Expert Valuation - Critique Summary to Date.

There is so much to say about the Independent Expert (IE) Valuation that I am afraid it may well go on for several posts yet.

However, it has been pointed out to me that the detail in my critique posts is bordering on being as long winded and difficult to absorb as the IE valuation itself. In an attempt to assist all shareholders, in this post, I will provide a summary of where we are up to in point form.

• The IE has chosen to value Cellestis using an Earnings Multiple methodology, rather than using a DCF. I have given the reasons why this is inappropriate. However, you don't need to rely on me to tell you that. As our good friend Rog on his BLOG points out, Deloitte themselves agree with us.

In a submission to ASIC (Deloitte response to ASIC Consultation Paper 143) Deloittes made it clear that with regards to DCF:

alternative valuation methodologies that may be used to value an Asset are likely to be less reliable that a DCF approach. In our view, other alternative approaches such as a market based method (resources multiples observed from comparable transactions) are approximations of a DCF approach and require or imply significant assumptions to be made which are often difficult to apply with a reasonable basis

• I have shown why we believe that the earnings multiple (18 to 20) that the IE has used in his valuation is too low. (I have more to say on this in later posts). The result of this is an excessively low valuation.

• The IE has subsequently used a DCF valuation to "confirm" the primary valuation. I have shown why we believe that the compound effect of his unnecessarily pessimistic view of the future and selection of an excessively high Discount Rate has resulted in a valuation that is not justifiable. Furthermore, the IE DCF valuation provides no premium for control.

• Far from "confirming" the primary valuation, a corrected DCF valuation clearly demonstrates that the primary valuation that IE has used as his primary methodology is flawed in choice, content and result.

In the end, we believe that the IE valuation cannot be relied upon by shareholders to establish that the offer of $3.55 per share by Qiagen is "fair and reasonable" and "in the best interests of shareholders".

Vic
Spokesperson
CSAG

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