Jonathan Milner letter to Abcam plc

$ABCM

Dear Fellow Abcam Shareholders,

Time for change, calling for focus

In late 2022 and early 2023, my concerns as a shareholder in our company grew significantly regarding Abcam’s performance following my departure from the Board in October 2020. Subsequently, I initiated a series of consultations with other owners of the business. By April of this year, my efforts revealed what I believe to be a distressing series of issues, including inadequate governance, lacklustre investor relations, deficient cost controls, and subpar execution.

In light of these well-documented failures, which I have extensively detailed on my website, I found it imperative to take action. I sought to rejoin the Board with the intention of leveraging my experience and expertise to help steer Abcam back to its previous fortunes. Regrettably, my request to rejoin the Board was beset with restrictions that would have limited my ability to contribute meaningfully and would have impeded my fiduciary responsibilities. Consequently, I felt compelled to convene an Extraordinary General Meeting (EGM) where I advocated for the selective replacement of the CFO, Chairman, and Chair of the Remuneration Committee, all of whom I identified as the principal contributors to the Company’s misfortunes. My aim was to rejoin the Company, with the intent of collaborating effectively with the current CEO, Alan Hirzel, as I had done previously.

June – Review of strategic alternatives

In June 2023, the Board made a significant announcement, stating that the Company had initiated a process to explore strategic alternatives for the Company by evaluating a broad range of options to maximise shareholder value, including ‘a potential sale.’ I agreed at the time that the Board should be given the opportunity to conduct this process I hoped that such a process would have started by addressing some of the actions I had spelt out in my June letter to shareholders, but I have also always openly supported a sale of the Company at a full and fair price. Therefore, reluctantly, I decided to withdraw my EGM resolutions to provide the Company with the necessary time and space to conduct the review and identify the best path forward for all shareholders. However, given the historical disregard and lack of consideration for shareholders displayed by the Executive Directors and the Board, I held reservations about the outcome of this review. I made it clear at the time in a public statement that I would review progress in the Autumn and that if it seemed that a full and fair process had not been run, I would reinstate my call for an EGM and hold the Board accountable. I also offered to rejoin the Board in any capacity (subject to a customary non-executive director contract but with no discriminatory restrictions that would prevent me from performing my duties) to bring my experience, expertise, and shareholder perspective to help with the strategic review process. This offer was not acted upon.

August – $24: the wrong price at the wrong time

My concerns were validated on August 28th when the Company disclosed that it had received what I, and other shareholders, consider to be an inadequately low offer of $24 per share from Danaher. I believe that this offer grossly undervalues Abcam, confirming my doubts about the Board’s commitment to securing the best deal for shareholders. This derisory offer highlights the gulf that has developed between the Board and shareholders. I believe the Company’s review of strategic alternatives had only one outcome in mind, namely, a sale of the business to deflect attention away from my call for focus on key metrics, governance and Executive Directors’ performance. I believe the proposals I have outlined for Abcam would provide a far better outcome for shareholders, returning the Company to the position it previously held as a premium-rated life sciences company with a long track record of impeccable execution and an absolute focus on shareholder value.

When I initiated my campaign earlier this year, my focus on fixing Abcam resonated with institutional investors and the share price experienced a notable increase, surging from approximately $15 to around $22, a 47% increase in value. Whilst some of this increase in value can be attributed to the mere action of initiating a review of strategic alternatives, it is my belief that the stock should be trading at these levels if the Company were under the stewardship of competent and disciplined executives and a Board with a clear strategy to further drive shareholder value going forwards.

The Executive Directors have argued that I should have waited for the shareholder circular to be published to understand the details of the negotiation process. I believe a detailed explanation of the negotiation process misses the point and will only serve to incur more costs and waste more time. With the strategic review being launched at a time when the Company’s performance was not optimal and sector multiples depressed, I believe it was highly unlikely to deliver full value for shareholders against that backdrop. Couple this with the swift acceptance of what I believe to be a subpar bid (within a mere two-month timeframe) and excessively favourable financial arrangements for Executive Directors (which I believe presents a significant conflict of interest), all at the expense of shareholders, and you reach what I maintain is the derisory offer of $24 per share that the Board wishes to recommend to you. Put simply, I believe $24 per share is the wrong price at the wrong time for a company that is a globally recognised brand in the life sciences sector.

Next steps – Vote AGAINST and consider my alternative plan for value creation at a forthcoming EGM

I believe that $24 per share is the wrong price at the wrong time for all of the reasons stated above. It seems nonsensical to be rushed into accepting $24 per share now when the deal is not expected to close until June 2024 at the earliest and there is a real opportunity to restore Abcam to a high performing and highly valued business that is recognised for its quality the world over. Like all shareholders, I believe there is a full and fair price to acquire control of Abcam and I shall not stand in the way of such an offer. However, I also maintain that without a strategic premium being paid now is not the right time to sell the business and, under my stewardship, we can turn around Abcam's fortunes.

Vote AGAINST to take the first step in seeing real shareholder value creation. Upon the successful conclusion of the “Vote AGAINST” campaign and the subsequent withdrawal of the proposed deal, my immediate course of action will involve calling for an EGM with the objective of reshaping the Company's Board, including the removal of the current CEO, CFO, and Chairman. I have created a shadow Board for Abcam, composed of highly qualified and independent nominees who share my vision. These individuals bring substantial sector expertise and adhere to top-tier governance practices and would be led by an experienced, industry-proven Chair to provide oversight and ensure accountability for the entire Board, myself included. I would assume the role of full-time CEO and one of my first tasks would be to reach out to the highly talented and dedicated staff at Abcam and provide leadership, focus and empathy with what will have been a long period of uncertainty.

Having served Abcam as CEO from 1999 to 2014 and later as Deputy Chairman from 2015 to 2020, I would bring a depth of insight into the Company and my tenure has consistently demonstrated excellent investor relations and a commitment to delivering shareholder value. Building on this legacy, earlier this year, I rolled out a six-month plan, aimed at elevating Abcam's market position by refocusing on the Group’s core leadership position in antibodies, improving operating and EBITDA margins, boosting free cash flow, and resuming dividend payments. This will include continuing the strategy that I initiated when I was CEO and supported as Deputy Chairman of increasing in-house manufacturing of Abcam’s own high-quality, high-margin products and decreasing reliance on third-party reagents.

Looking ahead, my strategy includes maintaining Abcam's listing on NASDAQ and listing the Company on the Main Market of the London Stock Exchange. To support me with this process, I am pleased to announce that I have appointed Peel Hunt, a leading UK investment bank, as part of my advisory team. With the benefit of hindsight, I believe that leaving the LSE last year was misguided and led to a number of long-term UK shareholders becoming sellers over time. Abcam also benefitted from a scarcity value when listed in London with a broad and deep following of long-standing institutional shareholders. This dual listing approach aims to better cater to UK institutions and would take advantage of recently announced regulatory reforms in the UK, while also prioritising the maintenance of the important NASDAQ listing in the US.

Shareholder value creation will be at the heart of my strategy and I strongly believe in transparency and equality for all shareholders. I encourage shareholders to visit my website for further details of my campaign and to see updates on my plan for Abcam.

I URGE ALL SHAREHOLDERS TO VOTE AGAINST THIS PROPOSED TRANSACTION ON THE PROXY FORM. THIS IS AN OPPORTUNITY FOR SHAREHOLDERS TO SEND A CLEAR MESSAGE TO THE BOARD THAT THEY ARE DISSATISFIED WITH THE PROPOSED ACQUISITION AS WELL AS WITH THE COMPANY’S GOVERNANCE, EXECUTION AND COST CONTROL.

Yours sincerely,

Jonathan Milner”

Source:

https://www.sec.gov/Archives/edgar/data/1492074/000110465923104483/tm2327042d1_ex99-19.htm