Australia's CSL sells JRH Biosciences for $370 mln
Tue Jan 18, 2005 10:48 PM ET
(Recasts first paragraph, adds analysts' and CSL executive's comments, adds Sigma impact, updates shares)
By Sonali Paul
MELBOURNE, Jan 19 (Reuters) - CSL Ltd. , the world's largest maker of human plasma products, has agreed to sell JRH Biosciences to U.S.-based Sigma-Aldrich Corp. for $370 million, and flagged it might give some of the money to shareholders.
CSL said it would use the funds from selling the cell culture reagent business for research and development and capital management moves that were unlikely to involve paying down debt.
Investors applauded the sale, priced at more than three times book value, and the potential capital return, pushing CSL's shares up as much as 3.3 percent to a two-and-a-half year high of A$32.64 before easing back a bit.
"It's a very good price," said Macquarie Securities analyst Paul Hughes.
The sale follows CSL's $675 million purchase last year of Aventis Behring and the sale of its animal health vaccines arm.
The company decided to get out of JRH because it faced the need to pour new funds into the business to sustain its growth, which would detract from a focus on plasma products and drugs.
"We're happy that they've sold it," said Allianz Dresdner Asset Management analyst Jakov Males.
CASH BACK TO SHAREHOLDERS
CSL Managing Director Brian McNamee said the company was comfortable with its level of debt.
"That tells you we're not about to embark on a massive debt repayment," finance director Tony Cipa said.
Macquarie's Hughes said those comments indicated the company could return the full $370 million to shareholders.
CSL bought JRH in 1994 for $20 million when it was operating at a loss.
Last year, JRH booked A$193 million ($146 million) in sales, accounting for 12 percent of CSL's sales and earned about A$41 million, making up 28 percent of CSL's earnings before interest, tax and amortisation.
The business makes and develops cell cultures and serum products used to make drugs, operating in the U.S. states of Kansas, Pennsylvania and Illinois, and in Britain and Australia.
Sigma-Aldrich said it expected JRH to help boost its earnings per share in 2005 to between $3.45 and $3.55 in 2005, compared with analysts' forecasts around $3.39, according to Reuters Estimates.
Its 2005 forecast included 10 cents-a-share dilution from the JRH acquisition, reflecting a charge to raise the acquired inventory to its fair value. It said it still expected earnings per share of $3.30 to $3.35 in 2004, in line with market forecasts.
"With JRH's history of profitable sales growth, its addition is expected to help us meet or exceed our long-term growth and return goals," Sigma-Aldrich's Chief Executive David Harvey said in a statement.
CSL said it would have more to say about how it would spend the proceeds when the sale is completed, likely before the end of March. It is due to report its first-half results on Feb. 23. The company's shares last traded up 1.87 percent at A$32.18 in a slightly lower broader market. Sigma-Aldrich shares closed up 1.76 percent at $59.53 in U.S. trading on Tuesday. ($1=A$1.32)
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