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Clayton, Dubilier & Rice Inc. stands to make more than 4 times its initial investment after reaching a deal to sell VWR International Inc. to Madison Dearborn Partners. VWR, a laboratory equipment distributor, announced late Wednesday it had agreed to be acquired by the Chicago private equity firm in a deal valued at $3.5 billion to $4 billion.
New York-based CD&R paid $420 million to acquire 70% of VWR, of Westchester, Pa., in April 2004 from Merck KGaA. Later that year, the buyout shop took almost $300 million out of VWR in a dividend recapitalization, netting about $299 million in proceeds. It then received about $294 million in a December 2006 dividend. With the dividends alone, CD&R had returned 112% of its original equity, one knowledgeable person said. With the sale, the firm will have made more than 4 times its initial investment, the source said. J.P. Morgan Chase & Co., Goldman, Sachs & Co. and Bank of America Corp. are providing the debt. The transaction is expected to close during the third quarter, according to a VWR statement. “Together with the team from CD&R, we have made VWR the market leader it is today, and we look forward to continuing our momentum,” John Ballbach, VWR president and chief executive, said in the statement. The target generates about $3.1 billion a year selling such lab products as chemicals, glassware and plasticware, safety equipment and instruments. It has about 6,300 employees, operations in 20 countries and more than 250,000 customers, mainly in North America and Europe, according to its Web site. VWR reported $191.1 million operating income for the year ended Dec. 31, 2006. The company had long-term debt of $953.6 million as of that date, according to a 10K filing March 30. Madison Dearborn Partners tapped J.P. Morgan Chase for financial advice. Sanford Perl and Mark Fennell of Chicago-based Kirkland & Ellis LLP provided legal counsel. VWR sought financial advice from Gregg Lemkau and Torrey Browder of Goldman Sachs and Mark Stephanz, Charles Ditkoff and Michael McIvor of Banc of America Securities LLC. Franci Blassberg is leading a Debevoise & Plimpton LLP team providing legal counsel to VWR. The team includes Gary Friedman, David Mason, Gregory Woods, Stuart Hammer, Vivian Blanco, Jonathan Levitsky, William Mulvey and Jeremy Rossman. The global laboratory supplies market totals $50 billion and is increasing by 3% to 5% a year on the continued growth of research and development budgets at biotech and pharmaceutical companies, an aging population and continued government funding of research, according to a November 2006 note from Moody’s Investors Service. VWR is the second largest lab product distributor in the world, with a 15% market share in the U.S. and 15% in Europe, Moody’s said. On March 12, VWR announced it had hired Goldman Sachs and Banc of America Securities to explore strategic options. The auction was competitive, with VWR deciding on five finalists by early April, according to Richard Schnall, a CD&R partner. After acquiring the company three years ago from Merck, CD&R instituted several changes to reorganize VWR, including upgrading the sales force, reducing operating costs and building out the management team. Sales have grown 15% since 2004, and Ebitda has increased more than 60%, the firm said. “We are extremely proud of the management team and of the performance gains achieved by the business over the period of our ownership,” Schnall said in a statement. The sale was the second big deal for CD&R announced Wednesday. In a separate transaction, the firm teamed with Kohlberg Kravis Roberts & Co. to buy the U.S. Foodservice Inc., the U.S. food distribution business of Amsterdam-based Royal Ahold NV, for $7.1 billion. In March, CD&R agreed to take lawn-care and pest control company ServiceMaster Co. private in a deal valued at $5.5 billion. Known as a specialist in buying corporate carve-outs, CD&R also co-owns car rental company Hertz Global Holdings Inc., water treatment business Culligan International Co. and European food distributor Brake Bros. plc.—Luisa Beltran and David Shabelman Categories Deal Video
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