Descendis doing Descendis things

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Descendis doing Descendis things

Descendis, as I like to call it, is a gift that keeps on giving for me. I don't hold shares in the company thankfully, so I simply sit back and enjoy watching the ongoing circus that involves shareholder activism, offshore lenders and management teams earning a fortune in the process.

After an announcement covering various topics on Wednesday, the share price closed 7.5% lower at R0.86. It has gained 13% this year and has created a lot of grey hairs in the process.

Ascendis Health (JO: ASCJ ) has postponed its AGM that was scheduled for 20th December because "shareholders will be on holiday" - did nobody think about this when initially scheduling it? I suspect the real reason is related to shareholder representation, as the company needs to verify exactly which activists have support from which shareholders.

The AGM must be held before 1st March 2022.

The other news is that Mark Sardi is being replaced by Andrew Marshall, the group's independent non-executive chairman. He has been appointed as acting CEO, as Sardi's resignation is effective from 31 December. Sardi has made himself available to advise the company until June 2022, no doubt for a handsome fee.

The lenders have reminded everyone that the group recapitalisation plan includes a clause that allows the lenders to render the facilities immediately due and payable in the event of a change in management that they don't agree with. This paragraph in the announcement looks like a not-so-subtle section aimed squarely at the shareholder activists and specifically Harry Smit.

The announcement also gave a strategy update, in which the board reiterated its view that Ascendis cannot carry on in its current form. There either needs to be disposals of businesses to help repair the balance sheet or an equity capital raise.

The proceeds for the Animal Health business have been received which certainly helps, but doesn't solve the problem entirely.

The board is currently evaluating three offers for Ascendis Pharma. The goal is to conclude a sale agreement by the end of February. The proceeds are expected to reduce the group's debt to below 2x debt: EBITDA.

Such disposal of Ascendis Pharma would require approval by more than 50% of shareholders as a Category 1 transaction.

The cost-cutting exercise at the head office continues, as the group plans to run its head office at a cost of 2.5% of group revenue by the 2023 financial year. Top tip: if you work at head office, you should be sending your CV out.

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