Eurofins strengthens its growth options with a EUR 200 million private placement to La Caisse de dépôt et placement du Québec

Other than stock options and warrants for its staff and management, this is Eurofins’ first equity issuance since October 2000, and represents a slight dilution of under 3.8% for its existing shareholders. Proceeds of the transaction will be used to optimize the Group’s capital structure, thereby increasing Eurofins’ ability to respond swiftly to strategic, value-enhancing opportunities, with the objective to create higher earnings per share (EPS) than the dilution impact from the new issuance. The transaction should increase Eurofins’ strategic options going forward, as well as the Group’s ability to generate value for its shareholders.

As communicated several times previously1 , even without this additional equity, as can be judged based on current trends, the Group management believes that Eurofins should be able to continue generating at least 5% organic growth and acquire about EUR 200m of external revenues per year to progress towards its objective of doubling in size again to reach EUR 4bn of revenues and EUR 800m of adjusted EBITDA by 2020. Indeed, given its liquidity and the strength in current operating trends (continuing in line with the ones observed in the first quarter of 2016)2 , Eurofins’ management does not believe it required additional funding to execute on this mid-term plan. However, the management also believes that the further optimization of its balance sheet and overall capital structure resulting from the CDPQ investment should enable the Group to respond swiftly to compelling larger opportunities if, and when they materialize, which could significantly accelerate the achievement of its mid-term objectives.

One of Eurofins’ stated objectives for 2016, rather than hoarding cash on its balance sheet, was to work towards a more flexible access to funding to be able to respond to large M&A opportunities should they arise3 . In addition to this EUR 200m investment, CDPQ has indicated a strong interest in supporting further investments by Eurofins. Several current large investors of Eurofins have also indicated strong interest in participating in further equity raises should they become required for one or several larger transactions. In this context, an investment of 606,061 shares from an investor committed to further capital deployment appeared preferable to issuing 1 million shares immediately, as considered in December 2015.

In addition, over the last few quarters, Eurofins has also secured further flexible bank financing that it only needs to draw as required. Over the next few months, Eurofins also intends to repay and refinance its older Schuldschein and OBSAAR bonds (of which EUR 170m and EUR 59m respectively remain due as of end June 2016) with instruments with longer maturities.

CDPQ, one of the largest institutional fund managers in North America, has a solid track record of long-term investments in companies that are leaders in their fields of activities, and that have proven ability to generate sustainable shareholder returns. As a manager of pension and insurance funds, CDPQ has a long investment horizon, providing the companies it invests in stable financial support over time.

Comment from Dr. Gilles Martin, Eurofins CEO: "This transaction provides Eurofins with the ability to potentially accelerate the achievement of its mid-term plan, should the opportunity arise, and create significant incremental shareholder value with limited dilution. CDPQ’s approach of focusing on long-term financial returns on its investment and deploying long-term partnerships with the companies it invests in, which may include supporting larger acquisitions, is entirely consistent with Eurofins’ strategy of deploying capital for long-term value creation and securing flexibility in its future funding. We look forward to a mutually beneficial partnership with CDPQ.”

Comment from Roland Lescure, Executive Vice-President and Chief Investment Officer at CDPQ: “With a solid, visionary management team, Eurofins has successfully established itself as a world leader in the cutting-edge market segment of bio-analysis testing. Under the leadership of Stephane Etroy, Head of Europe Private Equity, CDPQ will support Eurofins’ management team as it pursues its international growth plans and puts innovation forward to develop the company over the long term."