Companies

Charles River scraps bid for China firm

(Agencies)
Updated: 2010-07-30 15:32

Charles River Laboratories International Inc withdrew a $1.6 billion bid for WuXi PharmaTech (Cayman) Inc, citing investor opposition to what would have been the largest foreign takeover of a China company.

Charles River will pay WuXi a $30 million break fee after mutually agreeing to end the $21.25-a-share cash-and-stock offer made in April, the Wilmington, Massachusetts-based provider of research and testing services to drugmakers said today. Charles River also said its board approved a $500 million share buyback.

Jana Partners LLC, Charles River's largest stakeholder, urged investors to vote against the deal, citing "highly speculative" benefits and an "unreasonable price," in a statement issued hours before the announcement. The takeover would have given Charles River facilities in Shanghai, Suzhou and Tianjin in China, where cheaper labor and laboratory costs are luring the world's biggest drugmakers including Novartis AG.

Given shareholder "concerns about the proposed transaction, and our commitment not to proceed without their support, we have decided that terminating the transaction is the appropriate action to take," said James C. Foster, Charles River's chairman, president and chief executive officer, in a statement.

Charles River shares have lost a fifth of their value since the takeover was announced and fell $1.95, or 5.8 percent, to $31.95 in New York Stock Exchange composite trading yesterday, the worst drop in three months. WuXi declined 22 cents, or 1.5 percent, to a four-month low of $15, valuing the Shanghai-based company at $1.04 billion. The stock jumped 17 percent on the day of the takeover announcement and has since plunged 23 percent.

Related readings:  Charles River to spend $1.6b for WuXi Pharma  WuXi aims to beat rivals on price

Capital expenditure at Charles River hit a 10-year high of $227 million in 2007, according to data compiled by Bloomberg.

The company purchased Inveresk Research Group Inc for $1.5 billion in 2004 and also allocated about $600 million in the past five years to its preclinical-trial business, for an annual return of less than 5 percent, Jana said in a July 16 statement outlining its objection to the WuXi deal.

The takeover needed the consent of a majority of Charles River shareholders at an Aug 5 vote, which is now canceled.