Hedge fund attempting to break up MDS

OTTAWA - A New York hedge fund wants to break up MDS Inc., owner of MDS Nordion of Ottawa, in order to increase the price of the Toronto medical sciences company stock.

Obrem Capital declared Wednesday in a U.S. regulatory filing that it bought 6.2 million MDS shares - or 5.1 per cent of the company -  because it believes they are "undervalued and represented an attractive investment
opportunity" and could buy more.

The hedge fund said it plans to talk to MDS about action to lift share prices. It said that Obrem investors "believe that significant shareholder value could be created through the spin-off or sale of one or several of the
(MDS)'s business units and they intend to recommend that (MDS) formally hire financial advisors to explore such strategic alternatives."

Obrem Capital is led by Andrew Rechtschaffen, a Wall Street veteran of several hedge funds, who set up the investment bank a year ago. Obrem is also pursuing Micrel, a U.S. technology company, in the hopes that management will sell the company.  It has a 15 per cent stake in Micrel but that company management is resisting.

Obrem also wants MDS to consider "a significant share repurchase program."

The Obrem purchases of MDS stock may have already helped drive up the stock. It disclosed that it started buying at $16.25 per share in late February and made its most recently purchases Tuesday at $20.60.

In addition to the Nordion istope business, a profitable but slow growth business which was recently hit by supply troubles at Chalk River AECL reactor, MDS also makes medical diagnostic equipment and performs contract drug development work for clients. The latter business is slowly emerging from major U.S. regulatory issues.

Chief executive Stephen DeFalco has been reshaping the company in the last year, selling a hospital testing business and buying new medical testing gear. Nordion has sold some older product lines and expanded development of liver cancer treatments.

The last Ottawa company to be the target of a U.S. hedge fund action was Mosaid Technologies, an action which led the company to shed traditional testing equipment lines and focus on patent licencing.