Charles River Labs snaps up early-stage CRO for $510M

Dive Brief:

Charles River Laboratories has signed a binding offer to acquire Citoxlab, a non-clinical contract research organization (CRO), for a cash payment of 448 million euros — or about $510 million.
The move provides Charles River with access to sites across Europe and North America, as well as 1,500 trained staff.
The deal is expected to close in the second quarter of 2019 and be accretive to non-GAAP earnings per share by approximately 15 cents in 2019 and by at least 35 cents in 2020.

Dive Insight:

The Citoxlab deal follows Charles River's purchase of MPI Research last February, in a wave of consolidation that swept across the industry to improve economy of scale.

Charles River also picked up WIL Research in January 2016. The approach of steady acquisitions seems to be working well: according to the company's fourth quarter 2018 earnings results, the final quarter of the year was the second consecutive quarter to see revenue growth of greater than 10%. The company has a long-term target for a non-GAAP operating margin of greater than 20%, and sees its addressable market as being greater than $15 billion.

Charles River picked out Citoxlab because, in the words of CEO James Foster, the target "incorporates the key attributes we require in an acquisition: scientific expertise, complementary capabilities, talented people, and access to growing end markets."

Citoxlab brings capabilities in regulated safety assessment, non-regulated discovery, and medical device testing services, as well as a pool of experienced employees.

Charles River was also looking for an acquisition target that would improve its geographic footprint, particularly in Europe, as well as provide access to a biotechnology client base — its fastest-growing client segment in 2018. Citoxlab, with six sites across Eastern and Western Europe and three in Canada and the U.S., met these needs.

Citoxlab has facilities in France, Hungary and Denmark as well as sites in the U.S. The CRO's revenues were 155 million euros, or about $174.7 million, in 2018. Charles River projects that the deal will add around $115 to $130 million to its 2019 consolidated revenue and later approximately $200 million in 2020 consolidated revenue.