Charles River Laboratories International Inc. 'BBB-' Rating Affirmed Following Acquisition Announcement; Outlook Stable
- Charles River Laboratories International Inc. (CRL) recently announced its planned acquisition of Mattawan, Mich.-based non-clinical contract research organization MPI Research for roughly $800 million.
- While the acquisition stretches the company's adjusted pro forma leverage to about 3.6x, which is high for the rating, we project CRL will rapidly deleverage, to roughly 3.1x by the end of 2018, and about 2.7x by end of 2019, given its leading competitive position in the growing preclinical services industry, continued expected positive industry trends, and solid free cash flows.
- CRL has a solid track record of financial conservatism and operational performance. Average debt leverage is typically below 3x, despite an active merger and acquisition (M&A) program.
- As a result, we are affirming our 'BBB-' corporate credit rating on CRL. The outlook is stable.
- The stable outlook reflects CRL's leading position in the non-clinical pharmaceutical services industry, its dominant position in its niche research model segment, its steady revenue stream, and profitability that enables the company to maintain leverage below 3x over the longer term.
NEW YORK (S&P Global Ratings) Feb. 14, 2018--S&P Global Ratings today affirmed its 'BBB-' corporate credit rating on Wilmington, Mass.-based non-clinical contract research organization Charles River Laboratories International Inc. (CRL). The outlook is stable. CRL is acquiring privately held Michigan-based non-clinical safety assessment services provider MPI Research for roughly $800 million. The acquisition is consistent with CRL's strategy of enhancing its leading position in the fragmented but growing market for outsourced pharmaceutical non-clinical and manufacturing support services, while maintaining its position as the leader in the related research models and services business. Our stable outlook reflects the expected strength in pharmaceutical R&D and outsourcing, given continued positive outsourcing trends and high levels of biotech funding. We expect this will enable the company to reduce its leverage to well below 3x and to raise FFO to debt to above 30% by the end of 2019.
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Primary Credit Analyst: | Matthew D Todd, CFA, New York 212-438-2309; matthew.todd@spglobal.com |
Secondary Contact: | Arthur C Wong, Toronto (1) 416-507-2561; arthur.wong@spglobal.com |
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