– Enhances Charles River Endotoxin and Microbial Detection’s Position
as the Most Comprehensive Solution for Rapid Quality Control Testing –
– Transaction Expected to be Accretive to Non-GAAP EPS by
Approximately $0.05 in 2015 and $0.15-$0.20 in 2016 –
Charles River Laboratories International, Inc. (NYSE: CRL) announced
today that it has entered into a definitive agreement to acquire Celsis
International Ltd. for $212 million in cash, subject to customary
closing adjustments. Celsis is a leading provider of rapid bacterial
detection systems for quality control testing in the biopharmaceutical
and consumer products industries. Celsis’s systems are principally used
for product-release testing to help ensure the safe manufacture of drugs
and consumer products. The acquisition complements Charles River
Endotoxin and Microbial Detection’s (EMD) position as a leading provider
of rapid endotoxin testing and bacterial identification for
biopharmaceutical manufacturing, and creates the most comprehensive
solution for rapid quality control testing of biopharmaceutical and
consumer products.
The addition of Celsis, with its Advance II™, Accel™, and Innovate™
systems for non-sterile applications, will complement EMD’s recently
introduced PTS-Micro™, a rapid bacterial (bioburden) detection system
for sterile biopharmaceutical applications. The comprehensive EMD and
Celsis portfolio is expected to drive increased adoption of EMD’s
quality control testing solutions across both sterile and non-sterile
applications, as clients seek a single provider for their rapid
product-release testing needs.
James C. Foster, Chairman, President, and Chief Executive Officer of
Charles River Laboratories, commented, “The acquisition of Celsis
combines leading providers of endotoxin and bacterial testing and
bacterial identification to establish EMD as a comprehensive provider of
rapid quality control testing solutions across multiple industries. The
acquisition nearly doubles the market opportunity for EMD testing
products and services, offering access to the consumer products market
in addition to our core biopharmaceutical market. Celsis’s robust
financial profile enhances the EMD business, which is our highest-growth
and one of our highest-margin businesses. We expect Celsis to be
immediately accretive to non-GAAP earnings per share in 2015, with a
more significant contribution in 2016 and beyond.”
Additional Financial and Transaction Details
The revenue growth rate for Celsis is expected to be in the low-double
digits for the foreseeable future, with a non-GAAP operating margin
higher than the Manufacturing Support segment. The purchase price
implies a multiple of approximately 14x adjusted EBITDA for the last
twelve months through March 31, 2015.
The transaction is expected to close in the third quarter of 2015,
subject to customary closing conditions. Based on the anticipated timing
of the close, the acquisition is expected to represent approximately 1%
of Charles River’s 2015 consolidated revenue, and approximately 2.5% of
2016 consolidated revenue. It is also expected to be accretive to
non-GAAP earnings per share by approximately $0.05 in 2015 and $0.15 to
$0.20 in 2016. The Company expects to generate modest operational
synergies as a result of the acquisition, with benefits totaling at
least $2 million in 2016. Items excluded from non-GAAP earnings per
share are expected to include all transaction-related costs, which
primarily include amortization of intangible assets and certain
third-party integration costs.
The acquisition and associated fees are expected to be financed through
a combination of borrowings under Charles River’s revolving credit
facility and cash. Charles River will not assume any of Celsis’s debt or
cash balances as part of this transaction. Celsis will be reported as
part of the EMD business in Charles River’s Manufacturing Support
segment.
Webcast
Charles River Laboratories has scheduled a live webcast on Thursday,
July 9, at 8:30 a.m. ET to discuss matters relating to this press
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 Measures
This press release contains non-GAAP financial measures, such as
non-GAAP earnings per diluted share, which exclude the amortization of
intangible assets 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 press 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 press 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 infrequently and the underlying costs associated with such
activities do not recur on a regular 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 press 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 assess the
potential value of reporting non-GAAP results consistent with applicable
rules and regulations. A reconciliation of non-GAAP earnings per share
for 2015 and 2016 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 Statements
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 by 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 press release
regarding the acquisition of Celsis International Ltd. (Celsis),
expectations regarding the timing of the closing of the acquisition, and
Charles River’s expectations with respect to the impact of Celsis on the
Company, its service offerings, revenue, revenue growth rates and
earnings; Charles River’s projected future performance including revenue
and earnings per share; as well as Charles River’s future growth in the
area of endotoxin and microbial detection products and services.
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 Celsis. 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 17, 2015, 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.
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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