Inveresk Research downgraded to "neutral"

07/02/04 - Robert W. Baird

NEW YORK, July 2 (New Ratings) – Analysts at Robert W Baird downgrade
Inveresk Research Group Inc (IRGI) from "outperform" to "neutral." The target price is set to $37.

Shares of Inveresk Research Group Inc, a leading provider of a broad range of pre-clinical and clinical drug development and laboratory services to pharmaceutical and biotech companies, are currently trading at $35.19

According to Robert W Baird’s research note published this morning, the downgrade in rating is based on valuation. Inverest Research’s share price has appreciated by 14% following the announcement of the company’s acquisition by Charles River Labs (CRL). The $1.5 billion transaction involves the issuance of 0.48 shares of Charles River Labs for each share of Inveresk Research, the analysts mention. Inveresk Research’s shareholders would also receive a cash payment of $15.15 per share, taking the total purchase consideration to $38.61 per share, the analysts add.

Charles River Labs’ shareholders would own 73% of the merged company, with the remaining 23% being owned by Inveresk Research’s shareholders, according to Robert W Baird. The transaction, subject to the approval of the shareholders of both the companies, is expected to be completed in 4Q04, the analysts add. The merger of the two competing companies would reduce the long-term pricing and competitive pressures witnessed by the research industry, the analysts mention.

The EPS estimates for 2004 and 2005 are $1.34 and $1.58, respectively. The P/E estimates for 2004 and 2005 are 23x and 19.5x, respectively.

Robert W Baird downgrades Inveresk Research Group from "outperform" to "neutral."