25 May 2012

MDY to return cash

29/11/2011 Miles Nolan

As foreshadowed here earlier this month, AIM-listed investment company MDY Healthcare (MDY) has revealed plans to return surplus cash to shareholders.

The acquisition of Medivance, its largest single investment, by US giant C.R. Bard has now been completed, which has led to the payment to MDY of a chunky £13.98 million. This is a higher sum than MDY originally expected, and of the total, £12.8 million has already been received. MDY says the balance is in escrow pending potential warranty and indemnity claims, but the monies not used will be returned over 17 months.

MDY plans to pay off its current debt pile of £1.65 million, which would leave it with the equivalent of 65p a share (before interest repaid). The proceeds are not expected to give rise to a tax liability, but should lead to a windfall payment by March 2012. MDY still owns a 14.5 per cent stake in orthopaedic business Stanmore, which will be realised at the appropriate time.

We rated MDY as a speculative buy at 50p on 9 November, on the grounds that the sum of the parts was worth more than its then market value. The shares have jumped 24 per cent to 56.5p, which still values the minnow at less than its cash pile/likely value of Stanmore. Buy.

Tags: AIM market, Medivance, More upside, Return of cash, Stanmore

Sector: Financial Services

Companies: MDY Healthcare

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