Full Press Release Details
RIVER LABORATORIES TO ACQUIRE MPI RESEARCH
Enhances Charles River's Position as a Leading Global Early-Stage CRO -
Transaction Expected to be Accretive to Non-GAAP EPS by
Approximately $0.25 in 2018 and Approximately $0.60 in 2019 -
WILMINGTON, MA, February 13,
2018 - 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.
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.
supporting this client
segment and is recognized for its scientific expertise, flexible and responsive project management, and client service.
Additional Financial and
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 financial advisors to MPI. Weil, Gotshal & Manges LLP is acting as MPI's transactional legal counsel.
Charles River Laboratories has
scheduled a live webcast on Tuesday, February 13th, at 8:30 a.m. EST to discuss its fourth-quarter earnings, 2018 guidance,
and matters relating to this news release. To participate, please go to ir.criver.com
and select the webcast link. You can also find the associated slide presentation on the website.
Use of Non-GAAP Financial
This news release contains non-GAAP
financial measures, such as non-GAAP earnings per diluted share, which exclude the amortization of intangible assets, certain
third-party integration costs, certain costs associated with efficiency initiatives, advisory fees, and other charges related
to our acquisitions and expenses associated with evaluating acquisitions. We exclude these items from the non-GAAP financial measures
because they are outside our normal operations. This news release also refers to our revenue in both a GAAP and non-GAAP (constant
currency) basis. There are limitations in using non-GAAP financial measures, as they are not prepared in accordance with generally
accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular,
we believe that the inclusion of supplementary non-GAAP financial measures in this news release helps investors to gain a meaningful
understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent
with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods
or forecasts. We believe that the financial impact of our acquisitions (and in certain cases, the evaluation of such acquisitions,
whether or not ultimately consummated) is often large relative to our overall financial performance, which can adversely affect
the comparability of our results on a period-to-period basis. In addition, certain activities, such as business acquisitions,
happen irregularly and the underlying costs associated with such activities do not recur on a consistent basis. Presenting revenue
on a constant-currency basis allows investors to measure our revenue growth exclusive of foreign currency exchange fluctuations
more clearly. Non-GAAP results also allow investors to compare the Company's operations against the financial results of
other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this news
release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP.
The Company intends to continue to periodically assess the potential value of reporting non-GAAP results consistent with applicable
rules and regulations. A reconciliation of the effect of this transaction on non-GAAP earnings per share for 2018 and 2019 to
the most directly comparable GAAP financial measure has not been included because it is impracticable to determine the allocation
of the purchase price and other necessary adjustments at this time.
Caution Concerning Forward-Looking
This news release includes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified
the use of words such as "anticipate,"
"believe," "expect," "will," "may," "estimate," "plan,"
"outlook," and "project" and other similar expressions that predict or indicate future events or trends
or that are not statements of historical matters. Forward-looking statements include statements in this news release regarding
the acquisition of MPI Research, expectations regarding the timing of the closing of the acquisition, and Charles River's
expectations with respect to the impact of MPI on the Company, its service offerings, client perception, revenue, revenue growth
rates, and earnings; MPI's final 2017 financial results; Charles River's projected
future performance including revenue and earnings per share; Charles River's expected operational synergies; as well as
Charles River's future growth in the area of safety assessment. Forward-looking statements are based on Charles River's
current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could
cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties
include, but are not limited to, the ability to successfully complete the acquisition of MPI. A further description of these risks,
uncertainties, and other matters can be found in the Risk Factors detailed in Charles River's Annual Report on Form 10-K as filed
on February 14, 2017, as well as other filings we make with the Securities and Exchange Commission. Because forward-looking statements
involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by
Charles River, and Charles River assumes no obligation and expressly disclaims any duty to update information contained in this
news release except as required by law.
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.