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THE PLYMOUTH REPORT

The Plymouth Report is a presentation entitled 'Project Atlantic" given by investment bankers to HLS' special committee in July 2009 regarding Andrew Baker's proposal to buy out HLS. The special committee made up of HLS directors had the job of deciding whether to accept Baker's offer to buy out HLS, or find an alternative to HLS' financial problems, and this presentation formed part of that process in helping them reach a decision.

This document is very significant because it reveals the massive extent to which the global animal rights movement have damaged HLS, in fact it has a whole animal rights section which if it was any other company would be most unheard of! It shows that the SHAC campaign has been highly successful and is driving HLS in to bankruptcy. If you have ever doubted our campaign then this is an essential read. There is also an interesting NY Times blog about the Baker buyout, which puts everything in to perspective.

The Plymouth Report is 60 pages long (When you read the document, everywhere it reads "Atlantic" replace it with "HLS"; this was one of HLS' pathetic attempts to keep the report hidden), but here are the key points:

Intro:
• HLS contacted 50 companies to ask if they would be interested in pursuing a transaction with HLS.
• They received eight replies, but no large companies were interested.
• Four companies including Andrew Baker (HLS CEO) put in first round proposals.
• Two of these, then withdrew due to concerns over animal rights campaigning.
• Andrew Baker and an unknown mid sized Contract Research Organisation (CRO) went through to the next round.
• The CRO wasn't willing to pay above $7.50, and has now stopped responding to HLS.
• Andrew Baker then offered to buy HLS for $8.50 per share.

Alternatives to Baker Deal considered in the report:
• They could stay as they are, but the report stressed that doing this would have a clear risk of being de listed from the NYSE and a potential debt default (i.e. they couldn't pay back their 2011 loan); another problem with this is that HLS have low liquidity (i.e. no money). Nano Cap trap was also stated as a concern. Nano cap means a company that is as small as you can get and are very risky companies - they are stuck in a rut and see no way out!
• HLS could acquire another company, but HLS would not be able to get a loan to do this, and there were few attractive targets since that company would then be targeted by SHAC.
• HLS could buy back their own shares, but this wasn't viable because HLS don't have enough money and are already struggling to get loan.
• HLS could merge with another company - but no one was interested!

General Animal Rights Issues raise in report:
• The report says that the animal rights risk factors associated with HLS (financing, suppliers etc) are not suitable for core investors. 
• No actionable path is visible to escape the nano-cap they are in. 
• After reviewing the company the report states that despite HLS' claims that their growth is comparable to its peers their recent performance is not true and they are actually weaker.
• Principally due to animal rights activists HLS have traded at a 45-55% discount.
• Their recent financials show that they are performing worse than similar companies.
• HLS's earnings have been volatile and effected in large part by animal rights activists.
• No other public company in the research industry has been as effected by animal rights as HLS.
• A major concern for companies is being identified as working with HLS because of animal rights activists.
• Ongoing animal rights campaigning will raise additional risks for HLS.
• HLS would not have met a loan requirement in June 2009 and HLS has limited alternatives if it has to refinance its debt.
• Obviously many companies are effected by the recession, but HLS' 2009 earnings are expected to be down a massive 33% compared with just 6% for Covance who are equally effected by the recession.

NYSE Listing:
• HLS' worries about being de listed from the NYSE have increased.
• There are major concerns over the targeting of NYSE, and it's shareholders.
• In 2008/2009 animal rights activists have redoubled attacks on NYSE, its directors and shareholders.
• HLS no longer meet the minimum listings standards to stay on the NYSE, and their low liquidity (i.e. no money) and minimum shareholders equity (due to animal rights shareholder campaigns) increases the risk of de listing.

Additions:
• In October 2009, HLS were force to disclose even more of the Plymouth report. The newly revealed sections demonstrate that:
• There is limited investor interest in HLS.
• Animal rights activism has increased security costs.
• HLS struggle to win/keep customers.
• HLS' 2005-2006 efforts to secure new lenders failed twice.
• HLS' current lender insisted on a 15-16% interest rate, 700-900 bp above the market price.
• Their new lender may withdraw should their identity become know.
• HLS have few, if any, financing alternatives.
• HLS only have one research analyst, whilst their peers have between 5 and 10.
• Due to animal rights campaigning, HLS lost dozens of market makers.
• HLS' auditors have had to disguise their name to remain anonymous.

Conclusion:
What is clear from this report is that the SHAC campaign has had a significant impact on HLS' ability to operate. The campaign against the NYSE and HLS shareholders has put HLS in a very shaky position and HLS could be kicked of the NYSE any day now, and they know it. Financial institutions want nothing to do with HLS, and neither do any one else because they do not want to be identified as working with HLS.

Also due to the campaign no business wants to help HLS out with money and they are struggling to make loan repayments. They are at serious risk from going bankrupt and the Baker deal is their only way out, as no one else wants to help them. 

HLS' income is significantly down, and although we are in a recession, HLS' income has been effected to a much higher degree than similar companies like Covance. This will be largely due to customers going elsewhere as they know dealing with HLS leads to global campaigning.

HLS are in what is known as a nano cap trap which means they are high risk, and are the smallest of the small in companies, they are stuck in this situation because of the animal rights movement and they are struggling to come out of it.