The proposed $1.6bn deal has been criticised by some investors, namely Jana Partners, who are concerned about the cost, timing and integration risks. Charles River Laboratories (CRL) has responded to these concerns, first in a letter to Jana and now with a revised presentation.
In the revised investor presentation CRL said that it expects the combined company to generate $75m to $100m of revenue synergies a year by 2013. CRL expects the climb towards $100m to begin in 2011 as the combined company benefits from cross-selling and a combined sales force.
For CRL to begin realising these benefits it will have to win shareholders’ approval in the vote on August 5. Jana wrote a letter in June signalling its intent to vote against a measure needed to complete the deal and stated its belief that other shareholders would opposed the acquisition.
Despite this opposition CRL states in its revised presentation that it will not proceed with the acquisition without shareholders’ approval. In theory CRL could restructure the deal to bypass a vote.
Client support
While there have been concerns among shareholders CRL reports that the response from clients has been “overwhelmingly positive”. Having discussed the deal with top 20 biopharm firms that work with CRL or WuXi three unattributed quotes from senior executives have been published.
For example, the deal is described as “a transformational opportunity for the drug development industry” by the head of worldwide research at a top-five pharma. An executive at a first-tier biotech said the deal is “the most visionary and promising approach” of the past 30 years.