The CSAG Team has had extensive and detailed deliberations about the revised offer of $3.80 that Qiagen have made for our shares. Ultimately, we have come to the decision to accept this improved offer.
With the advent of this offer, we have had to consider many factors.
CSAGs stated intention has always been to achieve a better outcome for shareholders. Whilst accepting $3.80 may not be the best outcome that we might have wished for, it is certainly a better outcome.
We are very aware of the fact that some shareholders may be disappointed with our decision. This may not be the outcome that every individual shareholder might have hoped for. However, we should all consider the fact that we are in this together. In the end, the outcome of the vote will be binding upon all of us. Accepting the offer of $3.80 is undeniably better than receiving a payment of $3.55.
It is reasonably certain that, subsequent to a rejection of the Scheme of Arrangement, the share price of Cellestis would fall somewhat and may take some substantial time before reaching a price equal to this revised offer. Whilst many of us would not be concerned with such share price movements, there are other shareholders who would be significantly disadvantaged by such an event. We could wish that this Scheme of Arrangement that creates this situation had never happened but it has.
Whatever the outcome of this Scheme of Arrangement, there is no denying that Cellestis has changed forever. It can never again be the same Company that we all originally invested in. We need to consider whether we now, under these changed circumstances, still wish to remain invested in this "new" Cellestis.
We should consider that we now all have the opportunity to exit our positions in Cellestis for immediate cash that we can invest in other ways.
For most of us, the payment of up to 7c of the payment in the form of a fully franked dividend will effectively increase the $3.80 offer by up to 3c.
We now believe that it is in our best interests to divest ourselves of our shares in Cellestis for this improved price that we have achieved, add this event to our storehouse of knowledge and move on.
We can not and should not advise individual shareholders how they should vote. However, we urge everybody to seriously, pragamatically and sensibly consider their decision.
We should also look to the positives in this story.
It is an absolute certainty that without working together to exert our strength and conviction as shareholders, we would not have achieved this improved outcome. It is a result that we should all take some pride in.
We have clearly demonstrated that our active voice should and can be heard. Together, we have taken our place at the table in this Corporate Action.
Make no mistake. If, in the end, there is credit to be assigned for this meaningful improved outcome then it belongs to all of you. Thank You.
July 11, 2011
July 07, 2011
Why do we care about the Independent Expert?
To those reading these articles it may seem that we have a certain obsession with the report produced by the Independent Expert.
However, let's just briefly go back to the basics and understand why it is so important and why we might be very disappointed that we feel that we cannot rely upon the report produced by the Independent Expert.
The mechanics of a Scheme of Arrangement are that whilst the bidder (Qiagen) have offered to buy the Company, the actual Scheme of Arrangement is run and promoted by the target (Cellestis). Clearly, this means that both Companies are largely on the same side of the fence.
In an attempt to counteract the bias that might be seen to be operating under such an environment, the Scheme of Arrangement procedures call for a report by an Independent Expert to ostensibly ensure that we, the shareholders are not being unfairly treated by this Scheme of Arrangement.
That is, and should be, a huge responsibility on the shoulders of the Independent Expert. This is something that we would expect to be undertaken with the full recognition of this responsibility. As shareholders we are being asked to put a huge amount of faith in the Independent Expert. It is a central tenet of the entire procedure.
It is therefore absolutely essential that we all examine the procedures, assumptions and outcomes of the Independent Expert report with the greatest diligence. Without conducting such an intensive examination, how can we be assured, in our own minds, that a deal being offered is, in fact, fair?
Of course, we could just take it on face value. Perhaps many do.
I am disappointed that there are so many issues with the Independent Expert report that I cannot rely upon it to make a valid decision.
However, let's just briefly go back to the basics and understand why it is so important and why we might be very disappointed that we feel that we cannot rely upon the report produced by the Independent Expert.
The mechanics of a Scheme of Arrangement are that whilst the bidder (Qiagen) have offered to buy the Company, the actual Scheme of Arrangement is run and promoted by the target (Cellestis). Clearly, this means that both Companies are largely on the same side of the fence.
In an attempt to counteract the bias that might be seen to be operating under such an environment, the Scheme of Arrangement procedures call for a report by an Independent Expert to ostensibly ensure that we, the shareholders are not being unfairly treated by this Scheme of Arrangement.
That is, and should be, a huge responsibility on the shoulders of the Independent Expert. This is something that we would expect to be undertaken with the full recognition of this responsibility. As shareholders we are being asked to put a huge amount of faith in the Independent Expert. It is a central tenet of the entire procedure.
It is therefore absolutely essential that we all examine the procedures, assumptions and outcomes of the Independent Expert report with the greatest diligence. Without conducting such an intensive examination, how can we be assured, in our own minds, that a deal being offered is, in fact, fair?
Of course, we could just take it on face value. Perhaps many do.
I am disappointed that there are so many issues with the Independent Expert report that I cannot rely upon it to make a valid decision.
July 06, 2011
The Straw Man.
The Independent Expert, in trying to justify his selection of EBIT multiple used in his valuation, makes many statements that are intended to persuade us that Cellestis should be valued at the low end of every range that he is able to manufacture.
There are many examples of this but let's just look at a single one:
Given that Cellestis has never built its business or our expectations on achieving sales of any note outside the developed world this "relativity" is factually irrelevant. It was really just done to allow him to include the word "small" and to add to the picture that he is trying to paint of Cellestis being a company with a poor future. It would be just as (ir)relevant to compare the market for latent TB testing with the market for iPhones.
The potential market for latent TB testing in the markets that Cellestis is addressing is estimated at 45m tests p.a. Beginning and end of story.
I and others have actually queried an acknowledged expert as to whether this is a small market in the scheme of things. We have been told that this number of diagnostics is considered huge in the world of diagnostics and that any diagnostic company would love to have a market like that.
But, don't take my word for it. Ask Dr. Radford*.
*An ideal opportunity to do that would be at the webcast that they are planning for Friday. I understand that due to a "typo" on the leaflet distributed by Cellestis there is some confusion about the actual time of the webcast. I have now had it officially confirmed that the webcast is at 10am AEST Friday July 8th.
There are many examples of this but let's just look at a single one:
"Whilst the overall number of people infected with latent tuberculosis is significant, the actual market for latent tuberculosis testing is relatively small as the tests are more common in developed countries for certain screening purposes."This is "straw man" logic. Here he sets it up by admitting that latent tuberculosis is significant on a worldwide basis and then uses that to enable him to say that the QFT addressable market is relatively small.
Given that Cellestis has never built its business or our expectations on achieving sales of any note outside the developed world this "relativity" is factually irrelevant. It was really just done to allow him to include the word "small" and to add to the picture that he is trying to paint of Cellestis being a company with a poor future. It would be just as (ir)relevant to compare the market for latent TB testing with the market for iPhones.
The potential market for latent TB testing in the markets that Cellestis is addressing is estimated at 45m tests p.a. Beginning and end of story.
I and others have actually queried an acknowledged expert as to whether this is a small market in the scheme of things. We have been told that this number of diagnostics is considered huge in the world of diagnostics and that any diagnostic company would love to have a market like that.
But, don't take my word for it. Ask Dr. Radford*.
*An ideal opportunity to do that would be at the webcast that they are planning for Friday. I understand that due to a "typo" on the leaflet distributed by Cellestis there is some confusion about the actual time of the webcast. I have now had it officially confirmed that the webcast is at 10am AEST Friday July 8th.
July 05, 2011
What?
Qiagen want us to sell them our shares in Cellestis at $3.55.
Our Directors want us to agree to selling our shares to Qiagen at $3.55.
Now, there have been all sorts of arguments about what the real value of Cellestis is. Clearly Qiagen want a bargain. We want the true value of Cellestis recognised.
It is now the 5th of July. That means that Financial Year 2011 has ended. The sales for the year have been made, the profits are booked. And yet, despite several requests, our Company has said that they do not intend to provide to us, the owners of Cellestis, the Financial Year figures before the date at which they are asking us to decide whether to sell or not.
Does that seem reasonable to you?
The excuse that the Company has given for not releasing any figures to us is that they cannot do it in time.
However, many companies are willing to provide profit guidance a month or two before the end of the financial year (Cellestis has even done this in the past). We should be asking just why it is that we are getting nothing about the 2011 financials from our Company. It is material information.
We, the shareholders, have owned this business for the entirety of FY 2011. We deserve to know just how well our Company has performed during our ownership. How do they expect us to make a valid assessment of the offer that Qiagen has made without this information? I am sure that the reluctance to provide this information makes many of us feel uncomfortable.
If the Company truly cannot provide us with the financial results for the completed Financial Year then they should delay the vote on the Scheme until they can.
Our Directors want us to agree to selling our shares to Qiagen at $3.55.
Now, there have been all sorts of arguments about what the real value of Cellestis is. Clearly Qiagen want a bargain. We want the true value of Cellestis recognised.
It is now the 5th of July. That means that Financial Year 2011 has ended. The sales for the year have been made, the profits are booked. And yet, despite several requests, our Company has said that they do not intend to provide to us, the owners of Cellestis, the Financial Year figures before the date at which they are asking us to decide whether to sell or not.
Does that seem reasonable to you?
The excuse that the Company has given for not releasing any figures to us is that they cannot do it in time.
However, many companies are willing to provide profit guidance a month or two before the end of the financial year (Cellestis has even done this in the past). We should be asking just why it is that we are getting nothing about the 2011 financials from our Company. It is material information.
We, the shareholders, have owned this business for the entirety of FY 2011. We deserve to know just how well our Company has performed during our ownership. How do they expect us to make a valid assessment of the offer that Qiagen has made without this information? I am sure that the reluctance to provide this information makes many of us feel uncomfortable.
If the Company truly cannot provide us with the financial results for the completed Financial Year then they should delay the vote on the Scheme until they can.
July 04, 2011
The case of the missing control premium.
Crossposted from here
However RSM Bird Cameron spent some time on the matter and
Clearly the business of Cellestis is not comparable with those of real estate, diversified financials and banks. Apples with oranges. Had Cellestis been compared with similar industries we might have arrived at a different opinion
Final words from RSM Bird Cameron
---------------
It's helpful to spend some time looking at the control premium attributed to the market value of a Cellestis share. The IE says that Notwithstanding the relatively wide dispersion of control premiums observed in our study we consider the control premium range of 20% to 40% to be representative of general market practice..
..we consider a control premium at the lower end of the range to be appropriate for CellestisThis leaves the reader speculating on what exactly might be "appropriate."
However RSM Bird Cameron spent some time on the matter and
performed an analysis of successful takeover offers and schemes of arrangement (“offers”) made between 1 July 2005 and 30 June 2010, for companies listed on the Australian Securities Exchange.They found that different industries demand different control premiums
Clearly the business of Cellestis is not comparable with those of real estate, diversified financials and banks. Apples with oranges. Had Cellestis been compared with similar industries we might have arrived at a different opinion
Final words from RSM Bird Cameron
Control premiums vary significantly by industry and it may not always be appropriate just to use the widely accepted average.
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