Jonathan Milner letter to Abcam plc

$ABCM

Dear Fellow Abcam Shareholders,

I, along with my team of advisers, have considered the details of the Scheme Circular:

·

Management’s projections were everything I hoped they would be with Abcam now poised to reap the returns of the five-year plan and significant investments made.

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This transaction is not due to close until mid-2024, a transformational year for Abcam: FY23 to FY24 EBITDA margins are expected to increase by over 600bps accompanied by 16% revenue growth. I believe that such delivery would be expected to result in a significant uplift in Abcam’s share price.

·

Longer term, the Scheme Circular describes an even more attractive business:

o

revenue growth of 14% (FY24-FY26 CAGR);

o

significant expansion in adjusted EBITDA margins from FY23 through to FY26 when margins are expected to be nearly 50%, an increase of 1,140 bps.

With so much value creation potential ahead why is the Board rapidly pushing this transaction through now? Now more than ever, $24 is the wrong price at the wrong time and represents a significant transfer of value from Abcam’s shareholders to Danaher’s shareholders.

I will be issuing a more extensive presentation in the coming days which will cover the reasons to vote against the $24 per share bid from Danaher. This will be made available on www.abcamfocus.com

The Scheme Circular contains fairness opinions from Abcam’s financial advisers. I have concerns that too selective of an approach has been adopted for certain of their analyses. As recently as 20 June 2023 (see slide 17 of this document), Abcam helpfully identified the peer group of public companies which it considered to have the scale and financial profile closest aligned to it. However, it appears that Abcam’s financial advisers have missed the mark by minimizing (or leaving out) six out of the eight peer companies which Abcam itself has considered to be most comparable. Particularly notable is that the trading multiples for premium-rated companies like Repligen Corporation, Maravai Lifesciences and Illumina (all recently identified by Abcam as some of their closest aligned peers) did not contribute to the comparable company analysis thereby depressing the multiples and the implied value per share detailed.

Since September 2014 (when I stepped down as CEO to become Deputy Chairman) to 16 May 2023 (being the date of the last undisturbed share price prior to me stating my intention to call an EGM), the long term average EV/NTM EBITDA valuation multiple for Abcam was 22.1x NTM EBITDA (which excludes the impact of the pandemic from March 2020 to January 2022). The implied multiple for the $24 per share Danaher bid is 21.4x FY24 EBITDA (fully diluted basis, as derived from p95 of the Scheme Circular). I believe at a price of $24 per share, Abcam is essentially being sold without any premium for control.

As I have said before, this is the wrong price and the wrong time to sell the business. With such promising forecasts, why is the Board content to sell Abcam for a mere $24 per share which I believe does not reward Abcam shareholders with a premium for control? Serious questions are raised by the handsome cash incentives to Executive Directors following a change of control at Abcam (see pages 7 and 70 of the Scheme Circular). It appears to me that the Board has recommended a sale at $24 now because they have serious reservations about current management’s ability to bring the five-year investment plan to fruition and continue to drive significant returns for shareholders through Abcam remaining independent.

Given my continued dedication to the international life sciences industry, a deep understanding of Abcam’s growth drivers and as an author of the five-year plan, I believe I can help the brilliant people at Abcam continue to deliver outstanding financial performance into the future and take advantage of the opportunities stemming from the rapid change occurring in the biopharma industry. Abcam is an outstanding UK asset that should not be sold off to Danaher too cheaply. I reassure shareholders, employees and customers that I in no way wish to cause unnecessary disruption at a time that has been unsettling for everybody. I have always been open to engaging with the Board on a constructive, but unhindered, basis to realise the true value of Abcam for my fellow shareholders.

However, I want to be clear: I am prepared to sell to Danaher or to another bidder at the right price, provided that it accurately reflects the value and potential of the Company.

In summary, shareholders are not seeing the full value of the investment that Abcam undertook to drive improved performance over the longer term. Whilst Danaher may have been the highest bidder today, the timing of the strategic review was ill-advised and has therefore resulted in a sub-optimal offer.

Disappointingly, management’s poor corporate governance track record continues with its decision to set the record date two full trading days before publication of the Scheme Circular.

I URGE ALL SHAREHOLDERS TO VOTE AGAINST THIS PROPOSED TRANSACTION AND SEND A CLEAR MESSAGE TO THE BOARD THAT THEY ARE DISSATISFIED WITH THE PROPOSED ACQUISITION. YOU CAN CONTINUE TO VOTE AGAINST USING THE VALID WHITE PROXY CARD OR THE BLUE FORM OF PROXY / BLUE ADS VOTING INSTRUCTION.

Yours sincerely,

Jonathan Milner”

Source:

https://www.sec.gov/Archives/edgar/data/1492074/000110465923107825/tm2328070d1_ex99-20.htm