Charles River Laboratories is Acquiring Citoxlab

Charles River Laboratories International Inc. has signed a binding offer to acquire Citoxlab for 448 million euros in cash (or approximately $510 million), subject to customary closing adjustments. The proposed transaction is expected to close in the second quarter of 2019, subject to labor consultations, regulatory requirements, and customary closing conditions. Upon completion of the labor consultations, Citoxlab’s shareholders are expected to enter into a definitive purchase agreement.

Citoxlab is a non-clinical contract research organization (CRO) specializing in regulated safety assessment services, non-regulated discovery services, and medical device testing. With operations in Europe and North America, the proposed acquisition of Citoxlab would further strengthen Charles River’s position as a leading, global, early-stage CRO by expanding its scientific portfolio and geographic footprint, which would enhance the company’s ability to partner with clients across the drug discovery and development continuum.

James C. Foster, chairman, president and CEO of Charles River Laboratories, commented, “The proposed acquisition of Citoxlab would expand and solidify Charles River’s position as the partner of choice for our clients’ early-stage research needs, at a time when we believe there continues to be significant demand for outsourced services from both biotechnology and pharmaceutical companies. Citoxlab would be an exceptional strategic fit for Charles River because it incorporates the key attributes we require in an acquisition: scientific expertise, complementary capabilities, talented people, and access to growing end markets. The proposed acquisition would also enhance our geographic footprint, particularly in Europe, and our access to a growing biotechnology client base, enabling Charles River to provide a broader range of services proximate to our clients, both large and small. In addition to enhancing our value proposition for clients and meeting our disciplined acquisition criteria, we believe that the proposed acquisition of Citoxlab would generate value for shareholders, driving profitable revenue growth and non-GAAP earnings per share accretion of approximately $0.15 in 2019 and at least $0.35 in 2020. We greatly respect and are committed to Citoxlab’s employees, its scientific capabilities, and the reputation it has built over 50 years since its founding, and look forward to welcoming Citoxlab to the Charles River family.”

Jean-François Le Bigot, Ph.D., chairman and CEO of Citoxlab, added, “Becoming part of the Charles River family would be a significant achievement and recognition of the accomplishments of Citoxlab and our team. After many years of growth, I am very pleased and excited to embark on a new era for Citoxlab. I am confident that Charles River is committed to our global employees and advancing our mission through our extensive scientific capabilities. We believe the collaboration of our respective scientific teams, the implementation of best practices, and the synergies between the early-stage services offered by Charles River and Citoxlab would represent a significant growth opportunity for both organizations, and also enhance the value that we provide to all of our clients to meet their individual needs.”

The proposed acquisition of Citoxlab would strengthen Charles River’s presence in growing end markets, enhance its global scale and geographic footprint, and augment its scientific capabilities, providing a compelling value proposition for both clients and shareholders.

Strengthens service portfolio— <!– /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:3 0 0 0 1 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-536859905 -1073732485 9 0 511 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin-top:0in; margin-right:0in; margin-bottom:10.0pt; margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri",sans-serif; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:11.0pt; mso-ansi-font-size:11.0pt; mso-bidi-font-size:11.0pt; font-family:"Calibri",sans-serif; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} .MsoPapDefault {mso-style-type:export-only; margin-bottom:10.0pt; line-height:115%;} @page WordSection1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.WordSection1 {page:WordSection1;} — C itoxlab provides a broad suite of early-stage services that would strengthen Charles River’s existing capabilities in four key areas:

• General and specialty toxicology, including developmental and reproductive toxicology and ocular services, as well as agricultural and industrial chemical testing, including ecotoxicology services;
• Preclinical medical device testing services, significantly enhancing Charles River’s existing expertise;
• Non-regulated discovery solutions, ranging from traditional DMPK services to drug transporter and drug-to-drug interaction research; and
• Genomics research, adding unique expertise to Charles River’s capabilities in mechanistic and investigative toxicology.

Enhances global scale to meet growing demand—The proposed acquisition would enhance Charles River’s presence in Europe, particularly in Eastern Europe. Citoxlab has nine operating sites in six countries in Europe and North America, with global capacity totaling over 700,000 square feet.

Expands client base— Citoxlab has a diverse client base of biopharmaceutical, agriculture and industrial chemical, and medical device companies worldwide. Specifically, the proposed acquisition would further expand Charles River’s small and mid-sized biotechnology client base, its fastest-growing client segment.

Compelling financial profile— The addition of Citoxlab would enhance Charles River’s ability to achieve its long-term financial goals. The proposed acquisition is also expected to generate attractive returns on capital through profitable revenue growth and meaningful accretion to non-GAAP earnings per share.

The purchase price implies multiples of 13.8x non-GAAP EBITDA based on Citoxlab’s estimated last twelve-month results prior to the anticipated close, and approximately 11.7x non-GAAP EBITDA based on the estimated forward 12-month results after the anticipated close.

The proposed acquisition is expected to add $115 to $130 million to Charles River’s 2019 consolidated revenue based on the anticipated second-quarter close, and approximately $200 million to 2020 consolidated revenue. Citoxlab’s revenue is expected to grow at a high-single-digit rate, which is consistent with the long-term organic revenue growth target for Charles River’s Discovery and Safety Assessment (DSA) segment. Citoxlab is expected to be reported as part of Charles River’s DSA segment.

The proposed transaction is expected to be accretive to non-GAAP earnings per share by approximately 15 cents in 2019 and at least 35 cents in 2020. Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, advisory fees, and integration costs.

The proposed acquisition and associated fees are expected to be financed through Charles River’s existing revolving credit facility and cash.

Evercore is acting as the exclusive financial advisor to Charles River. Darrois Villey Maillot Brochier is acting as Charles River’s transactional legal counsel and Axinn, Veltrop & Harkrider LLP is acting as antitrust counsel. Goodwin Procter LLP is acting as Citoxlab’s transactional legal counsel.

Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them.