14th Jun 2006 07:01
Celsis International PLC14 June 2006 CELSIS TO ACQUIRE IN VITRO TECHNOLOGIES, INC. 14 June 2006: Celsis International plc (the "Company" or the "Group"), therapid diagnostics and analytical services company, today announces the proposedacquisition of In Vitro Technologies, Inc. ("IVT"), a US provider of in vitrotesting products and services to the pharmaceutical and biotechnologyindustries, for an initial consideration of $30 million in cash, plus anearn-out consideration capped at $5 million. About IVT • Supplies products and services to improve the drug discovery and development process • Focus on the growing in-vitro ADME-Tox market ("Absorption, Distribution, Metabolisation and Excretion") • improves the success rate in drug testing • estimated 50% failure rate of drug compounds during early stage development due to ADME or toxicity • Broad range of proprietary ADME-Tox tools, including cryopreserved cells and enzymes • Approximately 80% of 2005 sales generated from products, with balance from services • Clients include large blue chip pharmaceutical and biotechnology companies Reasons for the Acquisition • Attractive growth prospects of the in-vitro ADME-Tox market • Complementary fit with existing Celsis businesses which focus on saving time and money for pharma and biotech customers • Addition of new products with attractive margins • Cross-selling opportunities to combined customer base • Introduction of new skills and expertise to the Group for future products and services development IVT Financials • 2005 turnover of $11.6m (2004: $9.6m) • Gross margin of 69% in 2005 • 2005 operating profit of $1.2m (2004: $0.7m) • Initial consideration of $30m in cash, to be financed by existing cash resources and $13.5m debt financing • Earn-out based on 2006 turnover in excess of $13.1m (implied 13% growth against 2005 turnover) - capped at $5 million • Strong current trading: IVT turnover up 19% for 4 month period to 30 April 2006 against 2005 comparable period Excluding goodwill amortisation and exceptional costs, the acquisition isexpected to be earnings enhancing in the first full year of ownership. Thisstatement should not be interpreted to mean that the Group's future earnings pershare will necessarily be greater than its historical earnings per share. Commenting on today's announcement, Jay LeCoque, Chief Executive Officer said: "With the acquisition announced today of In Vitro Technologies Inc., Celsis willhave significantly transformed its business through improved product andservices portfolio and creating clear cross-selling opportunities which weexpect to deliver material growth in the coming years. Celsis is wellpositioned to continue its track record of strong growth both organically and byacquisition." Paul Silber, IVT's founder, added: "We could not have hoped for a better strategic partner than Celsis. Thesynergy created by joining forces will create a strong team with great potentialfor future growth. This new combination will provide our respective customerswith great value through a significantly expanded product and service offering.I very much look forward to working with the team at Celsis." The acquisition, because of its size, is a Class 1 transaction for Celsis underthe Listing Rules and is therefore conditional, inter alia, on the approval ofCelsis shareholders. A resolution to approve the acquisition will be proposedat an Extraordinary General Meeting of Celsis' shareholders to be held on 11thJuly 2006. Meeting for Analysts A meeting for analysts will be held at the offices of Financial Dynamics,Holborn Gate, 26 Southampton Buildings, London WC2A 1PB today at 9.30 BST.Please call Gemma Cross Brown on 020 7269 7125 for further details. Enquiries: CelsisJay LeCoque, Chief Executive Officer Tel: 01638 600151Christian Madrolle, Chief Financial Officer Tel: 020 7831 3113 Bridgewell Securities Limited Tel. 020 7003 3000Shaun DobsonXavier de Mol Financial Dynamics Tel: 020 7831 3113Ben AtwellAnna Keeble Proposed acquisition by Celsis International plc ("Celsis") of In Vitro Technologies, Inc. ("In Vitro Technologies") 1. Introduction It was announced today that Celsis Holdings Inc., a wholly owned subsidiary ofCelsis, has conditionally agreed to acquire the entire issued share capital ofIn Vitro Technologies, a US provider of in vitro testing products and servicesto the pharmaceutical and biotechnological industry, for a consideration of upto $35 million payable in cash, comprising $30 million on completion and anearnout consideration capped at $5 million. The consideration will be fundedfrom the Company's existing cash resources and from the proceeds of a $13.5million credit facility with Barclays Bank. Earlier today, the Company issued its preliminary results for the year ended 31March 2006 which demonstrate further organic growth achieved in each of theGroup's divisions, as well as increased profitability and cash generation of theGroup. In order to complement the Group's organic growth, the Directors haveidentified In Vitro Technologies as an excellent fit with the Group's activitiesin the pharmaceutical and biotechnological markets, as described in more detailbelow. The Acquisition, because of its size, is a Class 1 transaction for Celsis underthe Listing Rules and is therefore conditional, inter alia, on the approval ofCelsis shareholders. 2. Background to, and reasons for, the Acquisition Since joining the Group in late 2000 and following a restructuring of the Group,the executive management of Celsis has implemented a strategy focused on growingboth revenues and profits. The results for the year ended 31 March 2006demonstrate the continued success of this strategy. Celsis operates two divisions, the Product Group and the Laboratory Group. TheProduct Group is one of the main providers of diagnostic systems for the rapiddetection of microbial contamination and the Laboratory Group, based in the US,provides outsourced analytical testing services to pharmaceutical andbiopharmaceutical companies to ensure the stability and chemical composition oftheir products. Whilst the Directors believe that opportunities exist further to expand thegrowth in each of its divisions organically, the Board has recently reviewed anumber of acquisition opportunities with a view to complementing the Group'sorganic growth prospects. Consequently, the Directors have identified In VitroTechnologies as an attractive acquisition target and will continue to reviewacquisition opportunities as they occur. In evaluating the Acquisition, the Directors believe the following factors to besignificant: • Strengthened market position - The Directors believe that, following the Acquisition, the Enlarged Group's position in the US will be significantly enhanced as a provider of testing products and services to pharmaceutical and biopharmaceutical companies and that the Acquisition should extend the Group's range of products and services within that market. • New revenue opportunities - The Directors believe that the increased size and scale of the Enlarged Group as well as its enhanced range of products and products services should be an important factor in attracting new customers and increasing sales to existing customers, thereby providing new revenue opportunities for the Group. In addition, the Directors consider that the Enlarged Group should be able to benefit through the cross-selling of services and products between Celsis and In Vitro Technologies. • Higher margin activities and new skills - In Vitro Technologies' business focuses on the provision of products, which represent a majority of its sales, and services associated with the drug development process. Products sold by In Vitro Technologies command attractive margins and focus on the in vitro ADME-Tox market, a market which the Directors believe possesses strong growth prospects. In addition, the Directors believe that the employees of In Vitro Technologies will bring additional skills to the Enlarged Group and that the business of In Vitro Technologies is a strong platform for the future introduction of new products and services alongside those currently offered by the Group. • Low integration risk - The Directors believe that the business of In Vitro Technologies is an excellent fit with Celsis given the focus of both the Company's Laboratory Group and In Vitro Technologies on the pharmaceutical market, and the similar employee cultures which prevail. The Directors believe that these factors should reduce integration risk. The Directors are therefore confident in the prospects of the Enlarged Group andbelieve that, before taking into account goodwill amortisation and exceptionalcosts, the Acquisition will be earnings enhancing in the first full year ofownership. This statement should not be interpreted to mean that the Group'sfuture earnings per share will necessarily be greater than its historicalearnings per share. 3. Information on In Vitro Technologies Based in Maryland, Baltimore, USA, In Vitro Technologies provides products forthe study of chemical-biological interactions in vitro and in vitro testingservices in connection with the drug discovery and development process. In VitroTechnologies' clients principally include pharmaceutical and biotech companies,including a number of the largest blue-chip pharmaceutical companies. As at May2006, In Vitro Technologies had approximately 60 employees. Operating from a 28,000 square foot facility in Baltimore, USA and a 103 squaremetre facility in Leipzig, Germany, In Vitro Technologies offers ADME-Tox toolsand services which are used to predict the pharmacokinetics impact of compoundsearly in the drug development process. This is an important area of the drugdevelopment process as it is estimated that 90 per cent. of clinical candidatesfail during the development stage, with 50 per cent. failing due to poorabsorption, distribution, metabolism, elimination (ADME) or toxicity. For the year ended 31 December 2005, approximately 80 per cent. of In VitroTechnologies' revenues were generated through the sales of its products. InVitro Technologies' catalogue includes a number of proprietary in vitro ADME-Toxtools, including fresh and cryopreserved cells, enzymes and media producedin-house, as well as cells, enzymes and other items which it distributes forother producers. In Vitro Technologies' services relate principally to theprovision of in vitro ADME-Tox analysis through a small team of PhDs. Over the years, In Vitro Technologies has acquired particular expertise inhepatocyte technology and has developed a Biobank of cryopreserved humanhepatocytes. For the year ended 31 December 2005, In Vitro Technologies had turnover of $11.6million (2004: $9.6 million) and profit before tax of $1.2 million (2004: $0.6million). As at 31 December 2005, the gross assets of In Vitro Technologies were$8.6 million and net assets of $6.5 million. The financial information on In Vitro Technologies contained in this paragraphhas been extracted, without material adjustment, from the financial informationtable on In Vitro Technologies for the three years ended 31 December 2005, asset out in Part II of this document. Shareholders should read the whole of thisdocument and not just rely on the summarised information above. 4. Further details of the Acquisition Celsis Holdings Inc. has agreed to acquire the entire issued share capital of InVitro Technologies for a total consideration of up to $35 million in cash,comprising $30 million on Completion and earnout consideration capped at $5million. The initial consideration of $30 million is to be satisfied as to$26.25 million payable at Completion, with a further $3.75 million to be paidinto an escrow account on Completion (for the purpose of satisfying anyliabilities of the Sellers to the Purchaser under the Acquisition Agreement orrelated agreements). The initial consideration is also subject to adjustment byreference to the level of In Vitro Technologies' working capital and cashequivalents at closing. The earnout consideration (capped at $5.0 million) (the"Earnout") is equal to the product of 2.5 times, plus the excess, if any, of InVitro Technologies' revenues for the year ended 31 December 2006 in excess of$13.1 million. On completion of the Acquisition, Paul Silber, the founder of In VitroTechnologies and its president and chief executive officer, will enter into anew service agreement with In Vitro Technologies and will therefore become anemployee of the Enlarged Group. Paul Silber will be responsible for overseeingall operations, financial, human resource, marketing, sales and research anddevelopment of In Vitro Technologies and will report directly to the Company'schief executive officer. 5. Current trading and prospects for the Enlarged Group Celsis announced today its preliminary results for the year ended 31 March 2006.For the year ended 31 March 2006, Celsis announced revenues of $33.1 million(2005: $30.4 million), operating profits of $6.6 million (2005: $6.0 million),profit on ordinary activities before taxation of $7.2 million (2005: $6.2million). As at 31 March 2006, the net assets of the Group were $37.3 millionand the Group had net cash of $21.2 million. Since 31 December 2005, In Vitro Technologies' revenues for the four monthperiod ended 30 April 2006 were 19 per cent. higher than the equivalent periodin the previous year. In light of the current trading of Celsis and In Vitro Technologies and the factthat the Board believes that the Acquisition will strengthen the Group'sposition, the Directors are confident of the Enlarged Group's prospects for thecurrent financial year. 6. Extraordinary General Meeting An EGM will be held at the offices of Eversheds LLP, at Senator House, 85 QueenVictoria Street, London EC4V 4JL on 11 July 2006 at 8.30 a.m. The Resolution tobe proposed at the EGM is to approve the Acquisition. This announcement does not constitute, or form part of, an offer or solicitationof an offer to purchase of subscribe for, underwrite or otherwise acquire anyrights, shares or other securities. A circular containing full details of the Acquisition and convening theExtraordinary General Meeting is expected to be dispatched to the Company'sshareholders later today. Words and expressions defined in the circular to be issued by the Company inrelation to the Acquisition shall, unless the context provides otherwise, havethe same meaning in this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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