Companies

Charles River scraps bid for China firm

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

RiskMetrics Group said this week that shareholders should vote against the deal because the price was too high.

The proposed transaction "leaves very little room for error, amplifying the potential execution risk," RiskMetrics, an investor advisory firm, said in a report. The future of the contract-research industry, in which companies such as Charles River and WuXi conduct drug studies for drugmakers, is uncertain, RiskMetrics said.

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

WuXi said its strategy won't change after the terminated agreement. "Our goal is, and has long been, to build a broad, integrated R&D service platform designed to help our customers improve the success of research and shorten the time of new product development," said Ge Li, chairman and chief executive officer, in a separate statement.

Charles River said it plans to use cash in hand, existing credit facilities and other forms of financing to fund the share repurchase. The latest buyback is separate from a previously announced $600 million program, under which Charles River purchased about 11 million shares. That plan has a balance of $145 million and has been cancelled, the company said.

The buyback reflects the board's "belief that our stock price is substantially undervalued and also its faith in Charles River's future prospects," Foster said.

The biggest announced takeover in Chinese mainland by a foreign company is Diageo Plc's 610 million pound ($952 million) purchase of liquor maker Sichuan Swellfun Co earlier this year, according to data compiled by Bloomberg.