Charles River Laboratories International Inc and Inveresk Research Group Inc announced that their respective boards of directors have approved a definitive merger agreement creating a global partner in providing essential preclinical and clinical drug development services and products to the pharmaceutical and biotechnology industry. The strategic combination significantly expands the new company's services portfolio and strengthens its global footprint in the growing market for pharmaceutical research and development products and services, said in a release.
The combination of Charles River and Inveresk will create a company with approximately $920 million in revenues based on the twelve months ended March 2004, with substantial profitability and strong cash flow, giving it the size and financial stability to support the growing demand for outsourced development services from today's international pharmaceutical and biotechnology companies. The company will have operations throughout the United States, Canada, Europe and Japan.
Under the terms of the merger agreement, Inveresk shareholders will receive 0.48 shares of Charles River common stock and $15.15 in cash for each share of Inveresk common stock they own, representing a total consideration of $38.61 per common share, or a transaction value of approximately $1.5 billion, based on Charles River's closing price on June 30, 2004, of $48.87 per share. The stock component of the transaction is intended to be tax free for Inveresk's US shareholders. Following the close of the transaction, Charles River's shareholders will own approximately 73 per cent of the fully diluted shares of the new company, and Inveresk's shareholders will own approximately 27 per cent.
The combined company will be called Charles River Laboratories and will continue to trade on the New York Stock Exchange under the ticker CRL.
The agreement is subject to approval by both Charles River and Inveresk shareholders and customary regulatory approvals. The transaction is expected to be completed in the fourth quarter of 2004.
James C Foster, Charles River's chairman, president and CEO said, "Joining our two companies is a transformational combination that builds a broader strategic platform for growth. The new Charles River will be well positioned to provide essential products and services spanning the drug research and development effort, from early discovery through clinical trials. The merger will enhance our ability to serve our customers and accelerate their research efforts, while improving our operating efficiency. The combination expands our customer base and better positions us to benefit from the continuing growth in research and development spending."
Mr. Foster added, "We are bringing together two strong companies with complementary businesses to create a leading player across multiple disciplines in the drug discovery and development spectrum. As a leading player in research models and drug safety testing, the combined company will provide a platform to build larger businesses in preclinical and clinical disciplines where we already offer products and services, and to enter new closely related businesses with the potential for growth and profitability."
As a result of the combination, Charles River expects to achieve pre-tax cost savings and synergies of approximately $10 million in 2005, principally from consolidation of corporate infrastructure, as well as from operating efficiencies. The company expects additional pre-tax cost savings and synergies of $10 million in 2006, or a total annualized rate of at least $20 million. Charles River also expects revenue growth to increase as a result of a broader portfolio of essential products and services, a larger global footprint and synergies between the preclinical and clinical businesses.
Upon closing of the transaction, James C Foster will become chairman, president and CEO of the combined company. Dr Walter Nimmo, Inveresk's chairman, president and CEO, will become vice chairman of the Board and CSO of Charles River. All senior divisional operating executives of both companies will remain with the company. Charles River's Board of Directors will be increased to twelve members, including three from Inveresk.
The Inveresk brand will be retained for all preclinical and clinical businesses. The company, with more than 7,300 employees and 97 locations in twenty countries, will be headquartered in Wilmington, Massachusetts.