US-based contract research organisation (CRO) Charles River Laboratories (CRL) has gone on a public relations offensive with investors in an effort to override objections from leading shareholders to its planned $1.6 billion acquisition of China’s WuXi PharmaTech.
A special meeting of Charles River shareholders to vote on the proposal has been scheduled for 5 August. WuXi has a shareholder meeting pending on the same day.
Last month Relational Investors and Neuberger Berman joined CRL’s largest shareholder, JANA Partners, in coming out against the deal. Critics say the price is too high and the claimed synergies are not sufficiently compelling to outweigh the risks of integrating the two businesses.
Charles River has responded by issuing an updated investor presentation on the proposed acquisition, including the projection that the combined company will generate annual revenue synergies of at least US$75 million to US$100 million by 2013.
The company also says CRL and WuXi top management have reviewed the transaction with their respective top 20 pharmaceutical and biotechnology clients, and the response was “overwhelmingly positive”. Client comments enthusiastically endorsing the deal are provided as further evidence.
Clients view the “transformational” deal as a “strategic fit for the combined company, which offers them the opportunity to acquire more products and services from a single, larger entity”, the presentation states, adding that clients want “a more integrated approach to buying end-to-end services across the drug development continuum”.
In light of the preliminary client response, “we now feel more comfortable in providing investors with greater transparency and quantification of the expected top-line synergies we can generate”, commented James Foster, president and chief executive officer of CRL.
According to Foster, Charles River is “confident that our proposed combination with WuXi will create not only the world’s premier early-stage contract research organisation, but also significant shareholder value”.
The updated investor presentation also stresses that CRL will not proceed with the transaction without the approval of its shareholders.
In a letter to Charles River last month, asset manager Neuberger Berman said the proposed acquisition “will in effect be a referendum on management’s capital allocation strategy, and as such should only be done with the approval of a majority of stockholders”.
