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CORPORATE PRESS RELEASE
[LOGO]
Dennis R. Shaughnessy
Marcia Gookin
Investor Relations
978-658-6000 Ext. 1329
www.criver.com
CHARLES RIVER TO ACQUIRE PATHOLOGY ASSOCIATES INTERNATIONAL
WILMINGTON, MA.; DECEMBER 21, 2000: Charles River Laboratories
International, Inc. (NYSE:CRL), through its wholly-owned subsidiary Charles
River Laboratories, Inc., today announced the signing of a definitive agreement
to acquire Pathology Associates International Corporation from Science
Applications International Corporation (SAIC), for $37 million. PAI,
headquartered in Frederick, Maryland and a wholly-owned subsidiary of SAIC since
1995, is the world's leading contract toxicologic pathology company, with
estimated 2000 revenues of $33 million. The acquisition is expected to be
neutral to Charles River's earnings in 2001, and accretive thereafter.
PAI is a strong strategic fit with Charles River's rapidly growing
biomedical products and services segment. The two companies share a customer
base, and utilize complementary technologies to provide a broad range of
pre-clinical outsourcing services. Pathology services are a critical component
of drug discovery and development of human therapeutics, and the market for
outsourced contract pathology services is strong and growing. Large
pharmaceutical companies, established biotech companies, emerging biotech and
genomics companies, and government institutions such as the NIH, are all
customers for these technology-based research support services. Pathology
analysis and evaluation in animal research models such as mice allows a
researcher to determine the safety and efficacy of potential new drug
candidates, medical devices, and other biomedical products and services. There
is also an emerging market for pathology services to support genomics research
initiatives, where there has been a proliferation of genetically altered or
"transgenic" mice being used to identify innovative therapeutic targets and
improve accuracy of lead drug selection. This opportunity complements Charles
River's rapidly growing transgenic services business.
PAI is the leader in the market for contract pathology services in
animal research models, both in terms of market share and scientific expertise.
Charles River plans to accelerate the growth of PAI by using its extensive
global infrastructure and longstanding customer relationships to extend PAI's
presence into new markets, territories and applications. PAI has a long history
of strong and consistent profitability, with excellent opportunities for
enhanced returns through the efficient use of new technology and laboratory
management systems. Charles River's Chairman and CEO, James C. Foster,
commented:
"We're very excited about the potential of PAI as a Charles River
company. PAI has world class science, a very talented, deep and committed
professional team, and great potential for expansion and growth. We intend to
help the PAI team achieve and exceed its growth objectives by providing
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additional strength in both domestic and international marketing and selling,
while adding our support in a number of other areas where we can clearly add
value to our shared customer base. We see many synergies on the revenue side
that will enable PAI to further increase its share of the contract pathology
market, while also offering us the opportunity to provide to our customers a
more complete solution to their pre-clinical outsourcing needs. PAI is a
particularly strong complement to our drug discovery and development support
activities, as well as our contract site management effort, where revenue growth
over the past year has been exceptionally strong. We're particularly
enthusiastic about the opportunities in the transgenic services area, where the
requirements for our services among the research community continues to grow
dynamically. "
Added Mr. Foster: "We think of the acquisition of PAI as another step
in our historically successful acquisition program, where we have carefully
added new capabilities to our core business that leverage our existing customer
relationships, reputation, technologies and global infrastructure. We see
additional opportunities through internal development, technology partnerships,
and with additional targeted acquisitions, that will allow us to continue to
build our pre-clinical products and services franchise consistent with our
commitments to our biomedical research customers as well as to our new
investors. It's a very exciting time to be supporting drug discovery and
development activities around the world."
Dr. Gary Knutsen, the founder of PAI, added: "We're absolutely
delighted to be joining the Charles River family. We think this new relationship
presents us with a wealth of opportunities to continue and indeed accelerate our
growth as a company. We think Charles River is the ideal partner for PAI, as the
strategic and organizational fit is truly exceptional. We both enjoy
longstanding reputations as the scientific, quality and market leaders in our
fields. And we were each founded and continued to be built upon a commitment to
providing innovative tools, technologies and services to the biomedical research
community. We think combining PAI's unique scientific capabilities and Charles
River's worldwide presence and infrastructure is an very exciting proposition,
and one we expect will allow us to further increase our contribution to our
customers' drug discovery and development successes."
Charles River and SAIC expect the stock purchase transaction, which is
subject to customary closing conditions, to be completed in early January. (The
Hart-Scott-Rodino 30-day waiting period is scheduled to expire tomorrow.) The
purchase price of $37 million includes $25 million in cash (a portion of which
is expected to be financed with bank credit) and a $12 million convertible note.
The five-year term note will carry a 2% interest rate, and be convertible under
certain conditions into shares of CRL at $23.38 per share. After the
transaction, PAI will make up to $3 million in retention and incentive payments
to a broad group of employees, over a three-year period. PAI has no outstanding
debt.
PAI has nearly two decades of experience and more than 400 employees,
including over 40 pathologists and doctoral level professionals. The Company is
organized into three divisions, including a core pathology business, a
government contract site management operation and an FDA regulatory consulting
group.
The Company is the industry leader in providing pathology-based
technologies needed to support FDA filings (such as INDs and NDAs). Services
include neuropathology, medical device pathology, bone/joint pathology,
immunopathology, molecular pathology, ultrastructural pathology, automated
morphometrics, cell kinetics, aquatic pathology, reproductive toxicology and
teratology, and archive/repository services. The government contract site
management operation provides outsourced on-site and off-site
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laboratory support services to biomedical research agencies such as the National
Institutes of Health, typically under long-term contracts. This group's
expertise is in the efficient management of both small and large colonies of
animal research models under rigorous quality assurance standards. The small but
rapidly growing regulatory consulting group supports both small and large
biopharmaceutical companies through the FDA regulated processes associated with
efficacy and safety assessment in animal models. The staff is comprised of
former FDA and pharmaceutical industry professionals experienced in both the
science and strategy of the product development process for new medicines and
devices.
Charles River Laboratories, based in Wilmington, Massachusetts, is a
leading provider of critical research tools and integrated support services that
enable innovative and efficient drug discovery and development. The Company is
the global leader in providing the animal research models required in research
and development for new drugs, devices and therapies. The Company also offers a
broad and growing portfolio of biomedical products and services that enable
customers to reduce cost, increase speed, and enhance productivity and
effectiveness in drug discovery and development. Charles River's customer base
spans over 50 countries, and includes all of the major pharmaceutical and
biotechnology companies, as well as many leading hospitals and academic
institutions. The Company operates 53 facilities in 15 countries worldwide.
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This document may contain "forward looking statements." Such statements
involve a number of risks and uncertainties that could cause actual results to
differ materially from those stated or implied by the forward looking
statements, including the failure to satisfy the conditions necessary for the
closing of the transaction, the failure to recognize expected synergies and
revenue growth, contaminations, industry trends, new displacement technologies,
outsourcing trends, USDA and FDA regulation, changes in law, acquisition
integration risks, special interests groups, continued availability of products
and supplies, personnel and control, and others that are described in the Risk
Factors contained in Company's Registration Statement of Form S-1, as filed on
June 23, 2000, and as may be updated from time to time in the Company's periodic
SEC filings. The Company disclaims an intent or obligation to update forward
looking statements, and otherwise claims the "safe harbor" protections for
forward looking statements afforded under The Private Securities Litigation
Reform Act of 1995.
Charles River Laboratories International, Inc. is listed on the New
York Stock Exchange under the symbol CRL. The Company's listing application
contains additional information, available to the public on request, upon which
the NYSE relied in authorized the listing.
