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Sigma-Aldrich buys BioReliance for $350M

by David Holley | Published January 9, 2012 at 5:00 PM

Avista Capital Partners is exiting its four-year-old investment in biopharmaceutical testing company BioReliance Holdings Inc., via a sale to Sigma-Aldrich Corp. for $350 million in cash.

The sale price would allow New York-based Avista to book about a 3.5 times return on its equity. This is based on the existing $155 million debt that, according to Standard & Poor's Leveraged Commentary & Data, BioReliance assumed when Avista purchased it from Invitrogen Corp. for $210 million in February 2007.

St. Louis-based Sigma-Aldrich, which had $384 million in net income on $2.3 billion in sales of its life sciences manufacturing products, is buying a company that generated $110 million in revenue in 2010. Sigma-Aldrich said it expects the company to show double-digit growth in 2011.

Sigma-Aldrich's acquisition of BioReliance is expected to be modestly accretive to the company's diluted earnings per share in 2012, the company said. The buyer is financing the deal, which is expected to close in the first quarter, pending regulatory approval, with existing cash and credit facilities.

The purchase "creates one of the broadest product and service offerings for the development and manufacture of biological drugs," BioReliance president and CEO Charles Harwood said. He said BioReliance's specialized toxicology and animal health services units are complementary to other Sigma-Aldrich businesses.

Sigma-Aldrich shares were down about 41 cents to $61.93 midday Monday.

BioReliance of Rockville, Md., supplies a range of testing services to pharmaceutical, biotech and other life sciences companies. Companies might contract with BioReliance for manufacturing, for toxicology screenings, for biologic safety tests or for animal health testing, among other services.

Avista hasn't disclosed much information on BioReliance since 2007, but available details suggest the portfolio company hasn't experienced substantial growth, or may have gone through some belt-tightening. While it had 700 employees when Avista made the acquisition, BioReliance now has 650. The company maintains primary operations in Glasgow and Stirling, Scotland, and has sales offices in Tokyo and Bangalore, India.

In May, Moody's Investors Service upgraded BioReliance's $155 million in outstanding debt -- a first-lien term loan and a first-lien revolving credit facility -- to B1, from B2. The credit agency cited an improvement in the company's financial leverage in the prior year due to Ebitda growth and debt repayment. The service also said improved return demand for BioReliance's services boosted financial performance.

Sigma-Aldrich's interest in BioReliance doesn't come as a surprise. Similar contract research organizations, or CROs, which provide broader clinical testing services to life sciences companies, have been the target of M&A deals in recent months. Private equity firms Carlyle Group and Hellman & Friedman LLC are paying about $4 billion, using $2.2 billion in leveraged finance, to buy Wilmington, N.C.-based Pharmaceutical Product Development Inc. In May, Thomas H. Lee Partners LP-backed inVentiv Health Inc. announced it would buy PharmaNet Development Group Inc., another contract research organization.

Avista itself bought a CRO in August 2010. Avista teamed up with Ontario Teachers' Pension Plan to acquire San Diego-based INC Research LLC from majority owner Crosspoint Venture Partners of Woodside, Calif., and co-investor Adams Street Partners LLC of Boston.

CROs and other contracting and testing services had fallen out of favor with investors during the recession as pharmaceutical and biotech companies restrict spending, said Lauren Migliore, a Morningstar Inc. analyst, in December. But bookings by clients are returning, and investors picking up companies are expected to increase.

Avista declined to comment for the story.

Morgan Stanley's Lars Andersson of the healthcare team and Ari Terry on the mergers and acquisitions team provided financial advice to Sigma. In-house general counsel George Miller and corporate counsel Christallyn McCloud provided legal counsel, along with a team from Bryan Cave LLP that included Fred Bartelsmeyer and Todd Kaye.

Kristin Carey and Thomas Monaghan from J.P. Morgan Securities LLC advised BioReliance and majority owner Avista Capital Partners, while a Weil, Gotshal & Manges LLP team was their legal adviser. Weil's lawyers on the deal included corporate partner David Blittner and corporate associates Sarah Stasny, Ramon Mercedes and Janell Wise. Tax partners Scott Sontag and Amy Rubin, as well as tax associates Mark Schwed, Gregory Burns and Frazer Money also worked on the assignment, as did intellectual property partner Michael Epstein and litigation counsel John O'Loughlin.

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