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Avantor to Acquire VWR, Consolidation Promises Global Gains


On Jul 14, we issued an updated research report on Radnor, PA-based VWR Corporation VWR which offers laboratory products, services and solutions. The company currently carries a Zacks Rank #2 (Buy).

For the last three months, VWR has been trading above the Zacks categorized Medical – Dental Supplies industry. The company’s shares have rallied 20.3%, much above the 11.4% gain of the broader Medical Dental Supplies industry over this period.

Although we are currently looking forward to the company’s impending sale to ultra-high-purity materials supplier Avantor (announced back in May), the upside potential of the stock is, however, limited.

The divestiture, post-closing is expected to create a major consumables-focused solutions and services provider to high-growth life sciences and advanced technologies industries. The acquisition will build on the Avantor’s strengths, including its cGMP (current good manufacturing practice) processes, significant exposure to the emerging markets and VWR’s vital position across both Americas as well as Europe.

The combined company will therefore be serving a global customer base in all areas of its activities from research through production – reflecting a unique advantage in a fast growing marketplace.

From shareholders’ point of view, the potential merger with Avantor seems a beneficial move at the moment. The consolidation deal has been fixed at $33.25 in cash per share of VWR common stock, representing an enterprise value of approximately $6.4 billion. The purchase price represents an approximate 17% premium to the unaffected closing stock price as on May 2, 2017, the day before the start of market speculations regarding a potential sale of VWR.

The purchase price also denotes an approximate 20% premium to the 30-trading day volume weighted average price (VWAP) and an approximate 24% premium to the 90-trading day VWAP of VWR common stock as of May 2, 2017.

Key Picks

Other better-ranked medical stocks are Mesa Laboratories, Inc. MLAB, Edwards Lifesciences Corp. EW and Align Technology, Inc. ALGN. While Mesa Laboratories and Edwards Lifesciences sport a Zacks Rank #1 (Strong Buy), Align Technology carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mesa Laboratories has a positive earnings surprise of 2.84% over the last four quarters. The stock has added roughly 13.3% over the last three months.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has jumped around 25.6% over the last three months.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has surged roughly 34.1% over the last three months.

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