PE-backed Charles River to buy MPI Research for about $800 mln


Charles River Laboratories International has agreed to acquire MPI Research, a provider of testing services for biopharmaceutical and medical devices, for about $800 million in cash. Morgan Stanley is serving as financial adviser to Charles River on the transaction while Jefferies LLC and SunTrust Robinson Humphrey Inc are doing likewise for MPI. Charles River is backed by Avista Capital Partners.

PRESS RELEASE

WILMINGTON, Mass.–(BUSINESS WIRE)–Charles River Laboratories International, Inc. (NYSE: CRL) announced today that it has entered into a definitive agreement to acquire MPI Research for approximately $800 million in cash, subject to customary closing adjustments.

MPI is a premier non-clinical contract research organization (CRO) providing comprehensive testing services to biopharmaceutical and medical device companies worldwide. Acquiring MPI will enhance Charles River’s position as a leading global early-stage CRO by strengthening its ability to partner with clients across the drug discovery and development continuum.

James C. Foster, Chairman and Chief Executive Officer of Charles River Laboratories, commented, “In addition to meeting our disciplined acquisition criteria, MPI is an exceptional strategic fit for Charles River because it incorporates the key attributes we require in an acquisition: access to growing end markets, high-quality services, scientific expertise, and complementary capabilities. MPI’S one-million-square-foot, single-site facility in Michigan will provide needed capacity to meet current and future demand.”

“In addition to enhancing our value proposition for clients, we believe that the acquisition of MPI will generate value for shareholders, driving profitable revenue growth and non-GAAP earnings per share accretion of approximately $0.25 in 2018 and approximately $0.60 in 2019. We greatly respect MPI’s employees, its scientific capabilities, and the reputation it has built over the nearly 25 years since its founding, and look forward to welcoming MPI to the Charles River family,” Mr. Foster concluded.

Strategic Rationale
The acquisition of MPI will enhance Charles River’s access to growing end markets, builds scale to meet demand, and augments our scientific bench strength, providing a compelling value proposition for both clients and shareholders.

Expands client base – The acquisition aligns with Charles River’s strategy to expand its biotechnology client base, its fastest-growing market segment. MPI has specialized in supporting this client segment and is recognized for its scientific expertise, flexible and responsive project management, and client service.

Expands service portfolio – MPI will add ototoxicity and abuse liability capabilities, and expand Charles River’s existing capabilities in general toxicology and specialty toxicology, including ophthalmology, juvenile toxicity, molecular biology, and surgery, as well as medical device testing.

Builds scale to meet demand – With Charles River’s legacy safety assessment network operating near optimal capacity, MPI will provide safety assessment infrastructure to support Charles River’s current demand and future growth needs.

Enhances growth profile – The addition of MPI is expected to enhance Charles River’s ability to achieve its long-term growth goals. The acquisition is also expected to generate attractive financial returns through profitable revenue growth and meaningful accretion to non-GAAP earnings per share.

Additional Financial and Transaction Details
For 2017, MPI is expected to generate annual revenue of approximately $240 million. The purchase price implies multiples of 11.7x non-GAAP EBITDA based on the estimated 2017 results, and approximately 10.5x non-GAAP EBITDA based on the estimated 2018 results including operational synergies.

The transaction is expected to close early in the second quarter of 2018, subject to regulatory approvals and customary closing conditions. The acquisition is expected to add $170 to $190 million to Charles River’s 2018 consolidated revenue based on the anticipated timing of the close, and $260 to $280 million to 2019 consolidated revenue. MPI is expected to be reported as part of Charles River’s Discovery and Safety Assessment segment.

The transaction is expected to be accretive to non-GAAP earnings per share by approximately $0.25 in 2018 and approximately $0.60 in 2019. The Company expects to generate operational synergies as a result of the acquisition, with benefits totaling $13 to $16 million by the end of 2019. Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, certain costs associated with efficiency initiatives, advisory fees, certain third-party integration costs, and the write-off of deferred financing costs and fees related to debt financing.

The acquisition and associated fees are expected to be financed through an expansion of Charles River’s credit facility and cash. The Company is evaluating fixed-rate debt financing alternatives which could be used to finance the acquisition and for general corporate purposes.

Morgan Stanley & Co. LLC is acting as the exclusive financial advisor to Charles River. Davis Polk & Wardwell LLP is acting as Charles River’s transactional legal counsel and Axinn, Veltrop & Harkrider LLP is acting as antitrust counsel. Jefferies LLC and SunTrust Robinson Humphrey, Inc. are acting as finanical advisors to MPI. Weil, Gotshal & Manges LLP is acting as MPI’s transactional legal counsel.

About Charles River
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. To learn more about our unique portfolio and breadth of services, visit www.criver.com.

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