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LONDON, July 10, 2020 /PRNewswire/ —
To:Dr. Håkan Björklund (Chairman of the Supervisory Board)Stéphane Bancel (Supervisory Lath Director)Dr. Metin Colpan (Supervisory Lath Director)Prof. Dr. Ross Levine (Supervisory Lath Director)Prof. Dr. Elaine Mardis (Supervisory Lath Director)Lawrence A. Rosen (Supervisory Lath Director and Chairman of the Audit Committee)Elizabeth E. Tallett (Supervisory Lath Director and Chairwoman of the Compensation Committee)Thierry Bernard (Chief Executive Officer)Roland Sackers (Chief Banking Officer)
Hulsterweg 82, 5912 PL Venlo, Netherlands
Dear Members of the Supervisory Lath and Management Board,
Davidson Kempner European Partners, LLP is the sub-adviser to Davidson Kempner Basic Management LP which acts as the arbitrary advance administrator to assorted funds which authority in aggregate, as of abutting of business 10 July 2020, 6,853,458 shares of Qiagen N.V. (the “Company”). This accumulated captivation represents 3.0% of the allotment basic of the Company.
We accept abundantly accustomed the befalling to accept a chat with you. In our two letters, anachronous 11 June and 19 June 2020 and on our best contempo alarm with Dr. Håkan Björklund, Thierry Bernard, Roland Sackers and John Gilardi that took abode on 26 June 2020, we set out our apropos with account to a cardinal of key issues.
We are autograph this letter to accurate our appearance that the Lath of the Company should affair an Adverse Advocacy Change. We accept the action of €39/share from Thermo Fisher Scientific (“Thermo”) is bare as it fails to reflect the Company’s axiological standalone bulk and offers shareholders no exceptional for control.
Qiagen’s Affairs as a Arch Authorization in Atomic Affection and Activity Sciences
Under the administration of aloft CEO Associate Schatz and the founders, the Company has over the aftermost 36 years congenital a arch authorization aloft atomic affection and activity sciences. In particular, COVID-19 has accent and amplified the backbone and accent of the Company’s business in affection and testing and has positioned the Company to be a aloft almsman of the key civil trends in this industry. The Company’s articles accept become added important to governments and healthcare institutions as they seek to abate the accident of approaching bacilli and assure their citizens and economies. Abounding industry experts apprehend that spending on this ahead baby allotment of the healthcare industry will access essentially in the advancing years accustomed the bulk capability of these capabilities in managing pandemics. These developments should actualize cogent continued appellation bulk and allowances for all the Company’s stakeholders.
We additionally anticipate the proposed accretion of Qiagen by Thermo presents a awful cardinal and commutual opportunity. The accord has become alike added adorable as the impacts of COVID-19 and the broader implications accept become decidedly clearer back the antecedent advertisement on 3 March 2020.
Our Assessment of the Current Offer
We accept the cardinal assay appear on 15 November 2019 was conducted at a decidedly disadvantaged point in time for the Company, afterward anon afterwards a accumulation admonishing and the abandonment of the longstanding CEO, Associate Schatz. This debilitated the Company’s adeptness to abstract fair bulk for its shareholders from the process, as reflected by the adept access from a cardinal of parties anon afterward the abandonment of the CEO in October 2019. Afterward discussions with bristles parties during the assay period, the Company concluded talks with all parties on 24 December 2019. Interestingly, the Company Lath bound re-initiated discussions with alone Thermo in mid January 2020 and appear a accord on 3 March 2020. We agenda that the recommended action appear on 3 March 2020 at €39/share is finer the above as the $43/share (equivalent to €39.09/share) proposal fabricated by Thermo on 22 November 2019.
The Lath did not absorb any appulse of COVID-19 into their appraisal of the Company’s standalone bulk back accordant the €39/share accord on 3 March 2020. The Board’s appearance at the time was that they were allegedly blind of the appulse on the business. While the Lath now accede its materiality, they accept so far absitively not to amend the transaction affidavit (Offer Document, Candor Opinions, Reasoned Position Statement, Guidance and any ad hoc disclosures) or their advocacy based on the appulse now actuality advised too uncertain.
We accept COVID-19 has a actual continued appellation appulse on the affection industry. We accept spent a abundant bulk of time and accomplishment speaking to your peers, industry experts, accretion experts and accept conducted cogent proprietary assay in adjustment to accept the short, boilerplate and abiding trends for the affection industry, that accept been accent by COVID-19. We accept these trends are activity to be a cogent disciplinarian for the Company’s affairs and axiological bulk over the abbreviate and continued term, behindhand of the ambiguity about COVID-19.
The Current Action Undervalues Qiagen
We accept the standalone fair bulk to be about €50/share. The action of €39/share for the Company is accordingly bare as it fails to reflect the Company’s axiological standalone bulk and offers shareholders no exceptional for control.
Since 2 March 2020, the day above-mentioned to the transaction actuality announced, the allotment prices of the Company’s abutting European aeon accept added in bulk by an boilerplate of 61%, which added than reflects the 51% access in the boilerplate balance that these aeon are estimated to accomplish over 2020 due to the tailwinds of COVID-19. The Company’s basic Q2 balance appear on 09 July 2020 appearance that the Company delivered adapted EPS of $0.55-0.56/share – a 68% access over the above aeon in Q2 2019. Back 2 March 2020, the Company’s allotment amount has added by alone 21% afterward the Thermo offer, while we appraisal the Company will see its balance access 67% for the abounding year 2020. It seems reasonable to conclude, that if the Company was not in a bid bearings and was trading freely, the cogent access in balance they accept accomplished alongside the analogously afflicted European aeon would see the banal amount trading able-bodied into the mid €40s.
We accept the Company could bear $2,074m in Sales and EPS of $2.54 in 2020, which is a 32% and 67% boost vs. sell-side accord pre COVID-19. For 2021, we accept the Company could bear $2,433-2,756m of Sales (48-67% boost vs. sell-side accord pre COVID-19) and EPS $2.91-3.33 (76-101% boost vs. sell-side accord pre COVID-19). Afterwards the Q2 update, we accept alike added aplomb that the Company can bear these numbers or better.
We accept advised the US activity science aeon accustomed abounding were included by the Company’s banking admiral in their candor opinions as allotment of the Reasoned Position Statement. However, we agenda that their balance aisle is materially worse than the Company accustomed that the COVID-19 tailwinds do not account the declines in the blow of their businesses. For this reason, we accept this is the amiss associate set and we would apprehend the Company’s banal amount to materially beat these companies accustomed the abovementioned actual altered balance trajectory. Despite the abrogating balance revisions in 2020, we agenda that the broader US activity sciences associate set accept still apparent their allotment prices acceleration by an boilerplate of 23% back 2 March 2020.
Figure 1 of Davidson Kempner letter to Qiagen NV
Figure 2 of Davidson Kempner letter to Qiagen NV
Figure 3 of Davidson Kempner letter to Qiagen NV
1) Using Company advanced P/E assorted ambit of 19-21x (this is based on the bourgeois end of the celebrated assorted trading range). Multiples are activated to Davidson Kempner’s appraisal of the Company’s 2020 EPS. See Appendix for added details.
2) DCF based on Davidson Kempner assay of the Company’s COVID boost streams (see Appendix for added details) as able-bodied as accustomed out proprietary research.
Concerns About Accumulated Governance and the Rights of Boyhood Shareholders
The Action is codicillary on 75% of the Company’s shareholders abandonment their shares into the Offer. We additionally agenda that this alpha can be bargain added if the Company Lath were to accede to Thermo’s appeal to do so.
The Action additionally has a top-up mechanism, which accouterment Thermo satisfies the accepting action (or any bargain accepting condition), enables the Company to affair shares anon to Thermo to ensure that they end up captivation a minimum of 80% of the Company’s shares and Thermo can again clasp out boyhood shareholders. Consequently, Thermo will be able to access 100% of the Company’s shares and force out boyhood shareholders potentially apery a cogent allotment of the Company’s allotment capital. In addition, this would accredit Thermo to accomplish tax allowances it adeptness contrarily not obtain.
The aggregate of these two mechanisms is aggressive, awful apropos to us and undermines the adeptness of shareholders to assure their interests. If the Company’s Lath agrees with Thermo’s appeal to abate the accepting condition, Thermo could finer clasp the Company’s actor out at a akin essentially beneath than the 95% accustomed squeeze-out alpha assured by Dutch accumulated law and about accustomed standards in that jurisdiction.
We appetite the lath to exercise acute attention back because their abutment for any appeal to lower the accepting condition.
Davidson Kempner Considers the Current Action to be Wholly Bare and Will Not Tender Its Shares
The action of €39/share for the Company is bare as it fails to reflect the Company’s axiological standalone bulk and offers shareholders no exceptional for control. Accordingly, we will not be abandonment our shares into the offer.
In addition, we agenda aftermost Friday’s Reuters commodity suggesting accession abundant actor shares our views. We animate added shareholders to additionally accomplish their angle bright to the Lath of the Company and adios the offer.
Furthermore, we agenda that you accept declared on 22 June 2020 that the Company will amend the bazaar on abounding of the issues aloft and apprehend that you are accomplishing this as you too accept accomplished the cessation that the Action is no best adorable to the Company’ shareholders. We appetite the Lath to affair an Adverse Advocacy Change.
Please ability out to our aggregation with any questions you may have.
cc: Risto Koivula (Partner)
Davidson Kempner Banking Forecasts
RNA Reagents – Assumptions:- 2020 RNA reagent kits sold o Q3: 14mn (per month) / 41mn (for quarter) o Q4: 19mn (per month) / 58mn (for quarter)- 2021 RNA reagent kits sold o Q1: 20mn (per month) / 60mn (for quarter) o Q2: 14mn (per month) / 41mn (for quarter) o Q3: 10mn (per month) / 28mn (for quarter) o Q4: 5mn (per month) / 14mn (for quarter)- Boilerplate affairs price: $4.50 per kit- Profitability: 50% EBIT margin
Third Party Reagent Manufacturing – Assumptions:- Trends based on RNA reagent aggregate sales trajectory- Profitability: 30% EBIT margin
QiaStat Machines & Associated Consumables – Assumptions:- Machines: an incremental 225 machines (above and aloft what was accepted at the alpha of the year) are awash aloft 2020. No incremental machines awash in 2021- Consumables (COVID syndromic panels): incremental machines acclimated at 100% accommodation utilisation through 2020 afore bottomward to 50% in 2021- Profitability: 35% EBIT allowance on consumables
Base Business Performance – Assumptions:- 2020: o Q3: -15% vs Q3 2019 o Q4: -10% vs Q4 2019- 2021: 6% advance vs 2019 levels
Figure 4 of Davidson Kempner letter to Qiagen NV
Davidson Kempner DCF Assumptions
– RNA Reagents: o Kits sold – Low end of ambit based on above assumptions – High end of ambit assumes access up to 30mn at aiguille in 2021 abbreviation to 15mn in 2022 and aught thereafter o Boilerplate affairs price: $4.50 per kit o Profitability: 50% EBIT margin- QiaStat Consumables o Low end utilisation on incremental machines of 50% o High end utilisation on incremental machines of 100%- WACC range: 6%-7%- Terminal value: o RNA kits: based on a balance appendage of RNA kits which we accept will abide as a aftereffect of governments defective to ensure accommodation for any approaching outbreaks o QiaStat: terminal bulk based on the incremental machines awash during COVID and associated consumables from these machines
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