Charles River to buy N.C.-based Inveresk in $1.5 billion merger

Thursday, July 1st 2004, 10:27 am
By: News On 6

BOSTON (AP) _ Charles River Laboratories International Inc. is proposing to buy Inveresk Research Group Inc. for $1.5 billion in cash and stock in a merger of two companies hoping to capitalize on the growing market for drug research and development.

The deal announced Thursday has been approved by both companies' boards but still awaits shareholder and regulatory consent. It would create a company with 7,300 employees and about $920 million in revenues, based on figures for the 12 months ended March 31.

The combined company would keep Charles River Laboratories' name, have headquarters at Charles River's home in the Boston suburb of Wilmington and operate in the United States, Canada, Europe and Japan.

In a joint statement, Charles River and Cary, N.C.-based Inveresk said the deal would build on both companies' business providing drug development services and drug safety testing to pharmaceutical and biotechnology companies.

``The combination expands our customer base and better positions us to benefit from the continuing growth in research and development spending,'' said James C. Foster, Charles River's chairman, president and chief executive.

Foster would retain those titles in overseeing the combined company. Dr. Walter Nimmo, who holds the same three executive titles at Inveresk, would become vice chairman of the combined company's board and chief scientific officer.

Inveresk stockholders would receive 0.48 shares of Charles River stock for each Inveresk share, plus $15.15 in cash, for a total of $38.61 per share. That amounts to about a 25 percent premium based on the $30.84 price at which Inveresk shares closed Wednesday on the Nasdaq Stock Exchange.

Inveresk shares were up $5.91, or 19 percent, at $36.75 in early trading Thursday on the Nasdaq, while Charles River shares were down $2.57, or 5.3 percent, at $46.36 on the New York Stock Exchange.

The deal, which Charles River expects to close in the fourth quarter, was announced before the markets opened on Thursday.

Charles River shareholders would own about 73 percent of the combined company and Inveresk shareholders would own the remainder.

As a result of the deal, Charles River expects to realize about $10 million in operational savings next year, with another $10 million in additional savings the next year.

In a separate announcement Thursday, Charles River raised its second-quarter earnings forecast, citing an improved market for outsourced drug development services. With revenue growth now expected to reach 15 percent rather than the previous guidance of 9 percent, Charles River forecasts an earnings range of 50 cents to 51 cents per share, compared with 46 cents to 48 cents per share announced previously.