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August 2, 2010
Charles River Gives Up
Posted by Derek
So when Charles River Laboratories announced that it was buying WuXi, its stock dropped pretty sharply. But unlike many other takeovers, it never recovered, and a lot of the company's shareholders seem to have continued to be unhappy about the deal.
Unhappy enough so that on Friday the whole thing was called off. As that article makes clear, this is being seen as a particular victory for Jana, a hedge fund that's the largest single Charles River shareholder.
So where does this leave Charles River? Announcing a stock buyback plan and thinking about what the heck to do next. And where does it leave WuXi? That's a tough one, too. Someone else may decide to buy them (someone for whom it won't be as much of a stretch (and as hard a sell for the investors). But the price probably won't be as good this time around, at least not if an attempted deal happens in the near future. Or they may decide that it's time that they try to become the First Great Chinese Pharma Company. It's going to be a while before anything's clear - other than the fact that this particular deal isn't going through, that is. . .
Comments (11)
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1. darwin on August 2, 2010 1:44 PM writes...
where should i start?...
Permalink to Comment2. anonymous coward on August 2, 2010 4:05 PM writes...
Perhaps CEO Foster will finally have time to explain why he believes the Chinese at WuXi are better educated than American researchers.
My guess is that it's because America's best and brightest have opted to work at hedge funds like Jana. It explains both Foster's previous comments and the fact that this bone-headed merger didn't go through.
Permalink to Comment3. hell to the chief on August 2, 2010 6:00 PM writes...
Everything CR does now will go the same way as first early stage chemistry and then medicinal chemistry, PK, GLP bioanalytical etc. have gone. CR knew this and were trying to head it off but unfortunately for them, a hedge fund thought they knew better. Within 3-5 years all the GLP, IND-enabling and later stage studies that CR do or supply animals for will all be done in the WuXi Souzhou facitlity and WuXi will be in a position to take over CR rather than the reverse.
Permalink to Comment4. processchemist on August 3, 2010 2:57 AM writes...
Imho #3 is right. Probably Jana guys know that chinese CRO generate profits until they remain chinese. And this has nothing to do with discovering new drugs.
Permalink to Comment5. A Nonny Mouse on August 3, 2010 2:59 AM writes...
An associate of mine has just returned from China having set up a company to do all of the pre-clinical, P1 and P2 studies, with facilities being supplied FOC by the Chinese government. How can CR hope to compete with this?
Permalink to Comment6. processchemist on August 3, 2010 4:03 AM writes...
@5
This is usually called "dumping". Considering the few actions taken about dumping on products, probably any kind of battle against dumping on services has no hope at all. And this while the Chinese government makes more difficult china *importations*.
Permalink to CommentAnd many people in the western world still talk about the advantages of a global *free* market.
It's fun to play poker by the rules when the winning player is allowed to use some spare aces?
7. Anonymous on August 3, 2010 4:45 AM writes...
I think one day soon WuXi will buy CharlesRiver and others also...
China will take over...
Permalink to Comment8. MTK on August 3, 2010 7:09 AM writes...
Interesting that the stock took a big nosedive on the announcement of the buy on Apr 26, bounced around for awhile, then basically climbed up as the broader market fell, then started diving again last Thursday. 13% since opening on Thursday. Clearly word had gotten out a day before the announcement that CRL was giving up. So it seems that some of the shareholders at least were bullish on the merger.
Jana's stance on this is puzzling. They bought 7% of the company's stock after the WuXi purchase was announced! Then they pull the plug on it? Clearly, they didn't buy based on long-term value of the deal. Almost seems like they bought CRL on the cheap, knew they could torpedo the deal, and believed that the stock would go back to pre-deal values, thus making a handsome profit.
Didn't quite work that way now has it.
Permalink to Comment9. Anonymous on August 4, 2010 9:04 PM writes...
It reminds me of high school when choosing your date for the prom. If something goes wrong, you're toast and damaged goods! Glad i didn't attend my prom.
Permalink to Comment10. Anonymous on August 9, 2010 2:28 PM writes...
State of the art labs, plenty of man power working 24/7. Wuxi is a force to be reckoned with to be sure.
Permalink to Comment11. anon on August 9, 2010 8:03 PM writes...
"And many people in the western world still talk about the advantages of a global *free* market."
The "free market" is total bullcr*p when dealing with police states that use prison labor and dump all their waste in their rivers. It's a fairy tale told told by the rich to us peons to keep us believing we can somehow get on the exclusive gravy train. About as likely as getting a date with Paris Hilton.
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