Technicians work in the high throughput purification laboratory at the WuXi PharmaTech facility in Wuxi, Jiangsu province. [Ariana Lindquist/Bloomberg]
Shareholder objection scuppered deal, says American company
BEIJING - American medical research equipment and services company Charles River Laboratories International Inc on Friday abandoned its $1.6 billion takeover of WuXi PharmaTech (Cayman) Inc, citing opposition from its shareholders to the deal.
New York-listed WuXi PharmaTech is a pharmaceutical and biotechnology research and development (R&D) outsourcing company, with operations in China and the United States. In April this year Charles River said it intended to acquire WuXi.
Charles River had earlier said it will pay WuXi PharmaTech a $30 million break fee, in case the $21.25 per share cash-and-stock offer deal fails. The American company said its board approved a new $500 million share repurchase.
James C Foster, chairman of Charles River, said that the transaction would have resulted in long-term strategic benefits for its business and shareholders.
"But the company decided to proceed on the matter only after getting the requisite approval from the shareholders. Since they are not in favor of the deal, we have decided to terminate the transaction," said Foster.
Consequent to the deal termination, Charles River has also decided to cancel its planned shareholder meeting on Aug 5. The deal would have given Charles River drug-testing facilities in Shanghai, Suzhou and Tianjin.
Investment firm Jana Partners LLC, which owns a little more than 7 percent of Charles River's stock, had last month said the deal would generate highly inadequate returns for the company and also termed the acquisition price as too high.
The sale price of $21.25 per share is a 28 percent premium to WuXi's closing price on April 23, when the two companies announced the deal.
"WuXi will continue to grow and expand its business as a standalone research firm," said WuXi spokesperson Liu Jing.
James Song, a banker with investment banking department of Citic Securities said, "financial problems of the buyer is a major factor in the failure of a transaction."
Charles River shares have lost a fifth of their value since the deal was announced and fell by 5.8 percent or $1.95, to $31.95 on the New York Stock Exchange, its worst fall in three months.
According to IMS Health, an industry consulting firm, the pharmaceutical market in China increased by nearly 26 percent for the first six months this year.
