OREANDA-NEWS. January 23, 2018. Harvard Bioscience, Inc. (Nasdaq:HBIO) (the “Company”), a global developer, manufacturer and marketer of a broad range of solutions to advance life science, has entered into a definitive merger agreement to acquire 100% of the outstanding stock of Data Sciences International, Inc. (“DSI”) for approximately $70 million (subject to adjustment for net working capital and other customary adjustments).  Simultaneously, the Company completed the sale of its wholly-owned subsidiary Denville Scientific, Inc. (“Denville”) to Thomas Scientific, LLC for approximately $20 million, which includes a $3 million earn-out provision. 

DSI, a St. Paul, Minnesota-based life science research company, is a recognized leader in physiologic monitoring focused on delivering preclinical products, systems, services and solutions to its customers. Its customers include pharmaceutical and biotechnology companies, as well as contract research organizations, academic labs and government researchers. For the trailing 12 months (“TTM”) ended December 31, 2017, DSI had approximately $44 million in revenue.

The acquisition of DSI will be accretive to earnings at closing, diversifies the Company’s customer base into the biopharma and contract research organization markets, and offers significant revenue and cost synergies. 

  • DSI has a strong presence in the pharmaceutical and biotech industries, as well as with contract research organizations.  As of December 31, 2017, there is almost no overlap in the companies’ top customers.
     
  • The Company expects the transaction to generate approximately $2.5 million to $3.5 million in combined revenue and cost synergies 12 months following closing and increase over the first 3 years following closing.

The boards of directors of the Company and DSI have each approved the merger agreement and the merger, consummation of which is subject to customary closing conditions, including adoption of the merger agreement by the stockholders of DSI. Concurrently with the signing of the merger agreement, stockholders of DSI, representing a majority of the outstanding voting shares of DSI in the aggregate, voting together on an as converted basis, and of at least two thirds of the preferred stockholders of DSI, entered into voting and support agreements to vote their shares in favor of the merger transaction.

Denville is a Charlotte, North Carolina-based life science research consumables distributor.  For the year ended December 31, 2017, Denville contributed approximately $24.5 million in revenue to the Company.  Denville was no longer central to the Company’s strategy and the disposition allows the Company to focus on and add to its primary and more profitable instrumentation business.

“This is a momentous day for Harvard Bioscience,” said Jeffrey A. Duchemin, the Company’s President and Chief Executive Officer.  “Our entire organization has worked tirelessly over the last three years to build a foundation to be able to acquire and integrate a company like DSI.  From implementing ERP platforms, consolidating facilities, and initiating prudent cost containment programs, Harvard Bioscience is ready to take a significant step forward in our strategic vision of the Company.  With the sale of Denville, and upon the closing of the DSI acquisition, we will have transformed our company into a pure play life science instrumentation company with competitive advantages across our portfolio.  This strategic shift will make Harvard Bioscience a larger company, less susceptible to fluctuations in academic research funding, with improved profitability on day one.  We believe this transformation will set our organization on the path for sustained top-line and bottom-line growth.  I’d like to thank the employees of Denville for their contributions to making Harvard Bioscience a successful company.  I am also proud to welcome the DSI team to Harvard Bioscience and we look forward to working together to increase shareholder value.  The future is truly bright for Harvard Bioscience.”

As a result of these transactions, management expects the Company’s fiscal 2018 annual revenue to be between $118 million and $123 million.  The Company expects gross profit margins under generally accepted accounting principles (“GAAP”) to be between 54% and 57%, GAAP operating margins to be between 4% and 7%, and GAAP earnings per share (“EPS”) to be between $0.03 and $0.07.  These estimates equate to non-GAAP adjusted gross profit margins of between 54% and 57%, non-GAAP adjusted operating margins of between 10% and 13%, and non-GAAP adjusted EPS of between $0.19 and $0.23, respectively.  The Company may incur charges, realize gains, or experience other events in 2018 that could cause actual results to vary from this guidance. Refer to exhibits below for a reconciliation between the GAAP and non-GAAP diluted earnings per share guidance.

The acquisition of DSI, which will be financed through a combination of debt, the proceeds from the sale of Denville, and cash on hand, is expected to close by the end of January or early February 2018.  In connection with the closing of the Denville and DSI transactions, the Company’s existing credit facilities will be terminated, with the term loan of approximately $12 million in outstanding principal being paid in full, and the Company will enter into a new term loan and an up to $25 million revolving line of credit (together, the “New Credit Facility”).  Total outstanding debt from the New Credit Facility will be approximately $67 million at closing of the DSI acquisition.  The New Credit Facility will mature five years from the date it is executed. 

Janney Montgomery Scott LLC is serving as exclusive financial advisor to the Company and Burns & Levinson LLP is serving as legal counsel to the Company in connection with the transactions.

Webcast and Conference Call Details

The Company will be hosting a conference call and webcast on Tuesday January 23, 2018 at 7:30 am ET to discuss the announced transactions and recent business developments. Individuals interested in listening to the conference call may do so by dialing 888-771-4371 for domestic callers or 847-585-4405 for international callers, and referencing the conference ID# 46346356. To listen to a live webcast or a replay, please visit the investor relations section of the Company’s website at www.harvardbioscience.com.

Use of Non-GAAP Financial Information

In this press release, we have included non-GAAP financial information including adjusted profit margins, adjusted operating margins, and adjusted earnings per diluted share. We believe that this non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business. For the periods presented, these non-GAAP financial measures of income have excluded certain expenses and income primarily resulting from purchase accounting or events that we do not believe are related to the ongoing operations of the business such as amortization of intangibles related to acquisitions and stock-based compensation expense. They also exclude the tax impact of the reconciling items. This non-GAAP financial information is used by our management to internally evaluate the operating results of the Company.  Tabular reconciliations of our estimated non-GAAP adjusted operating margin percentage and non-GAAP adjusted earnings per diluted share are included as exhibits below in this press release.

The non-GAAP financial information provided in this press release should be considered in addition to, not as a substitute for, the financial information provided and presented in accordance with GAAP, and may be different than other companies’ non-GAAP financial information.

About Harvard Bioscience

Harvard Bioscience is a global developer, manufacturer and marketer of a broad range of solutions to advance life science. Our products are sold to thousands of researchers in over 100 countries through our global sales organization, websites, catalogs, and through distributors including Thermo Fisher Scientific Inc., VWR, and other specialized distributors. We have sales and manufacturing operations in the United States, the United Kingdom, Germany, Sweden, Spain, France, Canada and China. For more information, please visit our website at www.harvardbioscience.com.