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Charles River Laboratories International Inc. (CRL - Snapshot Report) recently announced that it has acquired privately held Accugenix, Inc. for approximately $17 million in cash. The acquisition has boosted the company’s in vitro (endotoxin and microbial detection/EMD) portfolio.

Erstwhile Accugenix, a world leader in cGMP compliant contract microbial testing services, has provided microbial identification services to various industries including the biopharmaceutical and medical device industries.

Charles River expects the acquisition to have no impact on 2012 earnings, which are expected in the range of $2.60–$2.70 per share. In 2013, it will account for 1% of sales and be slightly accretive to earnings. The 2012 and 2013 Zacks Consensus Estimates are currently pegged at $2.72 and $2.97, respectively.

Our Take

Charles River operates through two segments – Research Models and Services (RMS) and Preclinical Services (PCS). While the RMS segment represents approximately 61% of net sales, PCS segment represents 39% of net sales.

Thus, the performance of RMS segment is very crucial for the company. We believe that the company will benefit from Accugenix’s vast experience in providing accurate, time-effective and cost-effective microbial identification services.

The acquisition is in line with Charles River’s strategy of boosting its in vitro business through product extensions and acquisitions over the next few years. We are pleased with the company’s efforts of expanding the in vitro business, which is the company’s fastest growing business.

We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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