The largest individual shareholder of Charles River Laboratories International Inc. (NYSE:CRL) has deep reservations about the company’s proposed acquisition of WuXi (Cayman) PharmaTech Inc. (NYSE:WX) and they’re not shy letting their position be known.
Jana Partners Inc., a New York-based private investment fund that owns a 7 percent stake in Charles River Labs, said it plans to vote against the $1.6 billion cash and stock swap for the Shanghai-based clinical research organization. It called the bid by the two firms to combine discovery chemistry and biology “an untested proposition” and suggested that Charles River Labs could instead use money it plans to borrow for the deal to repurchase stock and boost the value of remaining shareholders’ stakes.
In a June 7 letter to company officials, Jana managing partner Barry Rosenstein said he had “serious doubts about the wisdom of pursuing this transaction at this time.” In particular, Rosenstein said Charles River’s current low share price would give WuXi a disproportionately large share of the combined companies — equaling a nearly 27 percent stake at CRL’s current price of around $32.44 a share.
According to securities ownership documents filed June 7, Jana bought nearly 4.7 million CRL shares over eight sessions ended May 26, paying between $31.88 and $32.67 a share. Rosenstein met with CRL CEO James Foster and WuXi CEO Ge Li June 3 to discuss their strategic rationale and to detail Jana’s reasons for opposing the merger.
“Not surprisingly in light of these facts, many Charles River shareholders have already expressed their displeasure with the proposed acquisition by disposing of their stock,” Rosenstein wrote, later asserting that the deal likely would be voted down when it’s put to a shareholder vote later this year.
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