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[DewDiligence]

Charles River Acquires WuXi for $1.7B in Cash+Stock

[The $21.25 nominal deal price is a 28% premium to WX’s closing price on Friday.]

http://www.forbes.com/2010/04/26/charles-river-labs-wuxi-deal-markets-equities-china-pharmaceuticals-update.html

›by Hana R. Alberts
04.26.10, 12:45 AM ET

HONG KONG - Charles River Laboratories plans to buy Shanghai-based pharmaceutical outsourcing provider WuXi PharmaTech in a $1.6 billion cash-and-stock deal, the companies announced Monday.

Once complete, the deal could mark one of the largest inbound M&A transactions in China.

Charles River will be able to offer services from research at the molecular level to testing products on humans, according to a statement. Major drugmakers turn to Charles River, headquartered in Massachusetts, to develop and test new products, often using animals. Outsourcing tasks to a Chinese contractor is one way to cut costs.

"The combination of WuXi and Charles River brings together two companies with a shared mission: to support and accelerate our clients' drug development efforts," Charles River CEO James Foster said in the statement.

Under the terms of the agreement, which the companies expect shareholders will approve by the fourth quarter, Charles River will pay a total of $21.25 for each American depositary share of WuXi, of which $10 will be in Charles River common stock and $11.25 will be in cash. The statement says Charles River is drawing from balance sheet cash it has on hand, and that it has received financing commitments for a $1.25 billion credit facility from JPMorgan Chase and Bank of America Merrill Lynch.

Foster will be CEO of the new company, while WuXi chief Ge Li will become corporate executive vice president and president of a newly formed arm of the company called gobal discovery and China services. Li and two other WuXi executives will also join Charles River's board.

Charles River has completed 30 acquisitions in the last decade. Foster told Forbes in a 2008 interview, as the company was completing a 50,000-square-foot research facility in Shanghai, that the company's takeovers are carefully planned.

"We've been very aggressive, but very targeted, very focused, very strategic in our acquisitions," he said. " We've never bought a company just to be bigger. We've bought a company to make us a better provider to our clients and to enhance our portfolio."

JP Morgan advised Charles River, and Credit Suisse advised WuXi.‹