Madryn Asset Management letter to ISS
#letter
Dear Mr. Guerra,
On behalf of Madryn, I want to thank you and your colleagues for speaking with us earlier in the month about the Proposed Merger between SomaLogic and Standard BioTools. We recognize that your team has to evaluate scores of contested situations and transactions each year. We also understand that, in the context of carrying out an evaluation, your team is required to quickly assess a significant amount of data, facts, and opinions from two sides that are ardently opposed to one another.
I am writing to you to respectfully request that ISS change its recommendation of “cautionary support” for the Proposed Merger after taking into account new information and our summarized response to Friday’s report. Although we are not an activist investment firm and do not subscribe to any ISS services, we feel compelled to contact you over this holiday weekend due to the very limited time until SomaLogic’s special meeting and in light of the recommendation’s potentially adverse impact on Madryn, the partners to whom we serve as fiduciaries, and all other SomaLogic shareholders. We believe that the report:
Contains inaccurate and/or non-public information pertaining to the SomaLogic Board of Directors’ (the “Board”) pre-merger search process for the Chief Executive Officer role – of note, the Company had not disclosed any attempt to recruit a permanent Chief Executive Officer that could have led the organization on a standalone basis going forward;
Minimizes SomaLogic’s available alternatives and pending value catalysts, which we believe were also under emphasized by the Company, including approximately $27 million in identified run-rate annual cost savings, an upcoming kit launch with Illumina, Inc. (“Illumina”), and the rollout of its 11K assay;
Omits material context and disclosures pertaining to the combined entity’s problematic pro forma capital structure and corporate governance, which stand to benefit conflicted insiders at the expense of SomaLogic’s existing shareholders;
Understates the shareholder opposition to the deal, which now includes Tikvah Management (a sizable shareholder) and total public opposition from nearly 15% of SomaLogic’s shares, in addition to four Section 220 demand letters, and two lawsuits (one of which was filed by the Company’s founder and Chief Technology Officer), and;
Overlooks the fact that the Proposed Merger is an irrefutable take-under that values the Company at materially less than its most recent disclosed cash balance.
These reasons, among others, compel us to urge ISS to reconsider its recommendation that shareholders accept (i.) an unnecessarily low valuation, (ii.) the fourth ranking security in the pro forma capital structure, (iii.) a significantly limited set of governance rights relative to the preferred equity holders, and (iv.) a process that was spearheaded by clearly conflicted directors with material business connections to Casdin Capital, LLC (“Casdin Capital) that are now further disclosed. In light of these points, particularly the merger consideration representing a discount to cash, we firmly disagree that “the proposed merger appears to be the best available alternative at this juncture.”
Despite the Company’s claims and ISS’ conclusion, SomaLogic has strong alternatives as a standalone entity that possesses valuable assets and hundreds of millions of dollars in cash that could underpin years of operations if an unconflicted Board felt that was the ideal path. If this is not clear, we encourage ISS and all shareholders to review our publicly disclosed recommendations on next steps for SomaLogic if the Proposed Merger is voted down.
While we would normally seek a private audience with you right away, we recognize that, with the limited voting timeline constructed by the Board, all interested stakeholders need to be made aware of these material omissions and apparent oversights immediately. Given the ongoing litigation acknowledged in Friday’s report, we hope ISS will view the disclosure of any other new information as its opportunity to revise its recommendation and remedy issues that may have been caused by the Company’s one-sided presentation and/or limited disclosures.
Please note that we expand upon our points in the appendix to this letter. We welcome the opportunity to speak with you and your team about these follow-up clarifications at any time. Thank you in advance for your consideration.
Sincerely,
Avinash Amin, MD
Managing Partner, Madryn Asset Management, LP
Source:
https://www.sec.gov/Archives/edgar/data/1787423/000119312523303011/d63454ddfan14a.htm