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RADNOR, Pa. - Avantor, Inc. (NYSE:AVTR), a global provider of products and services for life sciences and advanced technologies, has entered into a definitive agreement to divest its clinical services business to Audax Private Equity for approximately $650 million. The announcement made today marks a significant move in the company's ongoing business transformation.
The clinical services segment, which includes kitting, biorepository, and related equipment, is part of Avantor's Laboratory Solutions sector and employs around 800 people. It is projected to bring in about $200 million in annual revenue for the year 2024. The transaction is expected to be finalized in the fourth quarter of 2024, pending regulatory approvals and customary closing conditions.
Michael Stubblefield, President and CEO of Avantor, stated that this divestiture is aligned with the company's strategy to concentrate on growth opportunities in its lab and production businesses while also reinforcing its financial position. He noted that Audax is well-positioned to invest in and expand the clinical services platform for the benefit of all stakeholders.
Avantor plans to use the after-tax proceeds from the sale, estimated at $475 million, to pay down debt, which is anticipated to strengthen the company's balance sheet and reduce interest expense. The deal is also expected to decrease Avantor's capitalized leases by roughly $50 million.
The company will provide further details on the divestiture during its third quarter 2024 earnings conference call. J.P. Morgan Securities LLC is acting as Avantor's exclusive financial advisor, with Arnold & Porter providing legal advice. Audax's financial advisor is Moelis (NYSE:MC) & Company LLC, and Ropes & Gray LLP is providing legal counsel.
This news is based on a press release statement and contains forward-looking statements subject to risks, uncertainties, and assumptions. Avantor cautions that these statements are not guarantees of future performance and that actual results may differ materially from those projected.
In other recent news, Wheels Up Experience Inc. welcomed Gregory L. Summe, the Managing Partner of Glen Capital Partners LLC, to its Board of Directors. Summe's appointment fills the vacancy left by David Adelman and will continue until the company's 2026 annual stockholders meeting. His strategic planning and governance expertise is expected to contribute to his roles on the Audit and Compensation Committees.
In parallel developments, Avantor Inc . has been in the limelight with Baird raising the price target for the company to $27, maintaining an Outperform rating. This adjustment follows Avantor's second-quarter revenue meeting market expectations, with adjusted EBITDA margins surpassing both guidance and analyst predictions.
Furthermore, Avantor reported a steady performance for the second quarter of 2024. The company announced a reported revenue of $1.7 billion, with organic revenue decreasing by 2%. However, Avantor experienced an increase in adjusted EBITDA margin, reaching 17.9%, and an increase in adjusted EPS to $0.25. The quarter also saw the generation of $235 million in free cash flow and a significant debt reduction of over $200 million.
These are recent developments and investors are advised to keep a close eye on these companies for further updates.
InvestingPro Insights
As Avantor, Inc. (NYSE:AVTR) embarks on a strategic shift with the divestiture of its clinical services business, our InvestingPro metrics and tips reveal a multifaceted picture of the company's financial health and market performance. Avantor's market capitalization stands at approximately $17.36 billion, reflecting its significant presence in the life sciences and advanced technologies sectors. Despite a slight decrease in revenue growth over the last twelve months as of Q2 2024, with a -4.88% change, the company maintains a strong gross profit margin of 33.71%, indicating efficient cost management relative to its sales.
An InvestingPro Tip highlights that analysts are predicting Avantor will be profitable this year, which aligns with the company’s own expectations of growth opportunities in its lab and production businesses post-divestiture. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is 47.95, suggesting that investors are expecting higher earnings in the future. This is corroborated by the adjusted P/E ratio for the last twelve months as of Q2 2024, which is slightly lower at 44.73, indicating a potential normalization of earnings expectations.
InvestingPro data also shows a strong return over the last month, with a 1-month price total return of 18.58%. This performance could be indicative of market confidence in Avantor's strategic decisions and future profitability. However, it's worth noting that 14 analysts have revised their earnings downwards for the upcoming period, which could signal caution and warrants careful consideration by potential investors.
For those interested in exploring further insights, there are additional InvestingPro Tips available, providing a deeper dive into Avantor's financials and market predictions. Visit https://www.investing.com/pro/AVTR for a comprehensive analysis and additional expert tips.
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