Saturday, June 6, 2015

The quiet death of a Canadian success story

Sentinelle Medical was a cutting edge manufacturer of MRI technology based in Toronto. It was spun out from the Sunnybrook Research Institute where its technology had been developed with a combination of public and private investment. It was an innovative leader in the field of MRI technology used in breast cancer screening.

In 2010 the promising upstart was bought out by American health-care tech conglomerate Hologic for $85 millions. Sentinelle remained a largely independent entity within Hologic and kept its operations in Toronto.

In November of 2013 so-called "activist investor" Carl Icahn bought 34 million shares in Hologic, which gave the hedge fund tycoon about 12% of the company. He promised to shake things up to "unlock shareholder value," which is another way of saying he was going to slash and burn whatever he could to goose the share price and make himself wealthier. Apparently the one thing billionaires never have enough of is money.

How Icahn and his ilk can pull off their rapacious plundering with relatively minor stock positions isn't that much of a mystery. The business press tends to portray "unlocking shareholder value" as an altruistic public service, regardless of how much damage is done to the company, its employees, and the communities they are a part of. As in the case of the Ackman takeover of CP Rail, accomplished with a mere 10% ownership position, the other shareholders tend to shut up and go along for the ride.

The new Icahn installed board of directors at Hologic deemed Sentinelle to be insufficiently lucrative, and by late 2014 Sentinelle found itself in the hands of Inviro, the health and wellness division of Philips, the Dutch multi-national of light-bulb fame.

The Toronto operations were promptly shuttered, throwing the Canadian employees out of work.

At least they can take comfort in the fact that Mr. Icahn did indeed unlock shareholder value; his holding in Hologic is worth about $500 millions more today than when he bought in a year and a half ago.

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