CD&R completes $1.65bn VWR deal

Clayton, Dubilier & Rice takes over the laboratory supplies company from pharmaceuticals group Merck, putting $450m of its own equity toward the deal.

New York-based buyout house Clayton, Dubilier & Rice (CD&R) has completed the acquisition of VWR International, a US-based global distribution platform of laboratory supplies, from German pharmaceuticals group Merck for $1.65 billion (€1.36 billion).

 

The firm had originally intended to put up $600 million from its $3.5 billion Fund VI, but ended up committing only $450 million in equity. Co-investors Citibank and Bank of America each contributed $35 million to the deal. A syndicate of banks led by Citigroup and Deutsche Bank is providing the rest of the sum through various forms of debt.

 

CD&R announced the purchase in February. According to a Merck spokesman based at the group’s headquarters in Darmstadt, Germany, the US firm was one of seven parties, including other private equity investors, with an interest in the business.

 

CD&R first held talks with Merck’s CEO Bernhard Scheuble in 2001, who a year later turned his attention to selling VWR to a financial buyer after initial plans for a partial IPO of the division were called off in light of adverse market conditions. 

 

VWR is based in West Chester, Pennsylvania, and distributes laboratory supplies to the industrial, pharmaceutical, educational and government markets. The company has 5,880 employees worldwide and 2003 revenues of approximately $2.8 billion, of which approximately two thirds originate in North America and the remainder in Europe. According to Joe Rice, CD&R intends to grow the company in both regions.

 

The VWR purchase is right on the heels of CD&R’s sale last month of its 84 percent stake in Jafra Cosmetics International to Germany-based household appliance and consumer products company Vorwerk. Terms of the deal were not disclosed, though a source familiar with the deal said that the sale will yield CD&R approximately five times return on capital invested into the company. CD&R bought Jafra back in 1998 from Gillette for $200 million with equity from its Fund V and sunk approximately $77 million of equity into the business, the source said.

 

According to Rice, over the past 12 months CD&R’s Funds V and VI have returned nearly $2 billion to limited partners, including the $1 billion profit from the $2.4 billion sale of Kinko’s to FedEx in late 2003.