Recent Healthcare M&A Activity

By: Michael White

There are two interesting news stories from today that reinforce some of the key themes we are seeing in healthcare.  The first is Charles River’s earnings release and acquisition of MPI Research.  The second is the ~10% upward movement of AmerisourceBergen based on reports that Walgreens will acquire the remaining stake that it does not already own.

Charles River released earnings and issued 2018 guidance today that was essentially in line with analyst expectations.  The big news however was that Charles River was acquiring MPI Research for $800 million or 11.7x LTM EBITDA.  MPI Research is the fourth largest non-clinical CRO behind CRL, LabCorp and Envigo.  The deal is a strategic fit, enhancing CRL’s position in Tox and Safety with synergies of ~$13-16 million by the end of 2019.  Perhaps most importantly the acquisition expands the service offerings for its biotechnology client base as MPI has a focus on the biotech segment.  Charles River traded up ~6% on the news while the S&P500 was up 0.3% for the day.

AmerisourceBergen has traded up ~10% on news that Walgreens may acquire the remaining 74% of the company that it does not already own.  The two have been partners since 2013.  The move reflects further vertical consolidation in the healthcare sector and may be seen as response to the threat of Amazon and CVS’ recent acquisition of Aetna.  The deal would likely improve Walgreens’ profitability through increased purchasing power and leverage Walgreen’s recent agreement to acquire ~2,000 Rite Aid stores.  AmerisourceBergen has a market cap of ~$21 billion and Walgreens market cap is ~$70 billion.  Walgreens traded off ~0.3% on the news.  Cardinal Health, McKesson and Owens & Minor all traded off as the WSJ reported additional detail on Amazon’s medical devices strategy; we continue to see the threat of Amazon entry having wide ranging implications across healthcare.



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