SIAL (MM)

Life science and technology company, Sigma-Aldrich Corporation (SIAL) announced that it has agreed to buy BioReliance Holdings Inc., from private equity firm Avista Capital Partners for $350 million in cash. The acquisition is expected to close in the first quarter of 2012.

BioReliance Holdings provides biopharmaceutical testing services to pharmaceutical, biopharmaceutical, diagnostics, and other life science customers. BioReliance generated revenues of approximately $110 million in 2010 was projected to have double-digit growth expected in 2011. Avista Capital Partners acquired BioReliance in 2007.

The addition of BioReliance's industry-leading QA/QC testing services to Sigma’s product portfolio will enable Sigma to build better and more customized products.  The acquisition will extend Sigma’s reach into the promising new market of biologic drugs. Sigma-Aldrich expects the acquisition to be modestly accretive to its earnings per share in 2012. Sigma- Aldrich expects to fund the acquisition with a combination of existing cash and credit facilities. 

As per BioReliance, the acquisition creates one of the broadest product and service offerings for the development and manufacture of biological drugs.

In Late October 2011, Sigma-Aldrich delivered third-quarter earnings of 96 cents per share, surpassing the Zacks Consensus Estimate of 91 cents per share and an increase of 16% year over year.

The company incurred restructuring costs of 1 cent per share, including which earnings came in at 95 cents per share versus the prior-year earnings of 76 cents per share.

Reported sales in the third quarter of 2011 were $626 million, increasing 11% year over year, but missing the Zacks Consensus Estimate of $631 million. Excluding 5% impact from currency exchange rates and 2% from acquisitions, third-quarter organic sales growth came in at 4%.  

For full-year 2011, the company reiterated its expectation of organic sales to grow in the mid-single digit range. At current exchange rates, currency is expected to increase reportable sales for full year by approximately 4%. Acquisitions are expected to increase sales by another 1-2%.

The company revised its diluted adjusted EPS forecast for 2011 (excluding restructuring charges) in the range of $3.73 to $3.81 to reflect strong operating results through the first nine months and a lower effective tax rate. This represents an increase of 13% to 15% compared to 2010's adjusted diluted EPS of $3.31. The company expects its fourth-quarter diluted adjusted EPS to be in the range of $0.85 to $0.93.

St. Louis, Missouri-based Sigma-Aldrich Corporation is a leading life sciences and high technology company. It develops, manufactures and distributes various biochemicals and organic chemicals.

Apart from acquisitions, in order to boost its growth, Sigma-Aldrich plans to increase its focus on marketing, business development, R&D while continuing with its efforts to improve process and operations management.

Sigma-Aldrich faces stiff competition from Bayer AG (BAYRY) and privately held companies Brenntag AG and VWR International, LLC. We currently maintain a Zacks #3 Rank (short-term Hold recommendation) on Sigma and a long-term Neutral recommendation.

 
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