IPO Report: VWR Corp. (VWR)

VWR Corp. (VWR) is a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets. It is based in Radnor, PA,

Ten other companies are scheduled for the week of Sept. 29, 2014.  The full IPO calendar is available at IPOpremium.

Manager, Co-managers: BofA Merrill Lynch, Goldman Sachs, J.P. Morgan, Barclays, Deutsche Bank, Citi, Jefferies, William Blair  
Joint-managers:  Cowen & Company, Mizuho Securities, SMBC Nikko, Drexel Hamilton, Loop Capital Markets

End of lockup (180 days):
End of 25-day quiet period:

VWR scheduled a $600 million IPO with a market capitalization of $3 billion at a price range midpoint of $23.50 for the week of September 29, 2014 on Nasdaq.  SEC filings

VWR IPO Overview

VWR is a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets.

VWR Valuation

Glossary

Conclusion

Neutral minus
Top line rev +4%, operating margin 6.2%
Proforma income up only because of debt repayment
P/E of 29, -$40 per share dilution

Business

VWR is a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets.

#1 market position

VWR has the #1 market share position in Europe with the broadest Pan-European platform and the #2 market share position in North America in the $39 billion global laboratory products market.

VWR also has operations in Asia-Pacific and other key emerging markets to support its multinational customers across the globe.

VWR serves a critical role in connecting over 300,000 customer sites with over 4,000 core laboratory product suppliers across multiple industries and geographies.

Broad Portfolio

VWR offers one of the broadest portfolios of branded and private label laboratory products and a full range of value-added services, including custom manufacturing, to meet its customers’ needs.

VWR offers over three million unique products and have developed an extensive global infrastructure comprised of over 160 facilities and approximately 4,000 sales and service-focused professionals.

VWR delivers value to its customers by improving the costs, efficiency and effectiveness of their research laboratories and production operations.

VWR delivers value to its suppliers by providing them with cost-effective channel access to a global and diverse customer base.

Portfolio

VWR’s portfolio includes chemicals, reagents, consumables, durable products and scientific equipment and instruments with a range of complexity and sophistication.

VWR offers most of the leading branded products in the customer segments it serves. VWR’s private label products enhance its branded product offerings by providing additional choice at varying price points to its customers.

VWR complements its branded and private label product portfolio with value-added service offerings marketed under the “VWRCATALYST” brand, including sourcing and procurement, logistics, chemical and equipment tracking and sample management.

VWR has recently expanded its service offerings to include more complex scientific research support services, such as DNA extraction, bioreactor servicing and compound management.

In addition, VWR offers custom manufacturing solutions, including buffers, reagents and other chemicals used in biopharmaceutical and industrial applications and production processes.

VWR believes these growing value-added service offerings integrate it within its customers’ critical operational processes and further differentiate its value proposition from that of its competitors.

VWR believes its range of offerings and capabilities enhances its ability to expand its addressable market and gain market share leading to incremental net sales and profits.

History & Reach

Over its 162-year history, VWR has built longstanding and extensive customer relationships. VWR provided solutions to over 120,000 customers in 2013, including 227 Fortune 500 companies, approximately 4,500 leading academic institutions and thousands of smaller businesses in multiple industries.

During 2013, VWR generated over $100,000 in net sales from each of over 4,000 different customers. VWR’s broad and diverse customer base includes pharmaceutical, biotechnology, agricultural, chemical, environmental, food and beverage, healthcare, microelectronic and petrochemical companies, as well as educational and governmental institutions.

VWR’s global infrastructure and extensive inventory enable it to serve its customers in and across multiple geographies, and its local presence enables VWR to provide them with tailored expertise and support. VWR has developed global strategic relationships with its largest customers through which VWR  centrally manages and actively collaborates with them, helps optimize the efficiency of their research, production and procurement activities and support them with dedicated on-site professionals and technicians.

Because VWR sources substantially all of its products from third-parties, it is independent and able to provide its customers with access to an unbiased and broad selection of products.

Intellectual Property

VWR uses a number of different registered and unregistered trademarks and service marks for its products and services, substantially all of which are owned by us. However, VWR has not registered all of its trademarks or service marks in each country in which it does business. Generally, registered trademarks have perpetual lives, provided that they are renewed on a timely basis and continue to be used properly as trademarks, subject only to the rights of third parties to seek cancellation of the marks.

Competition

In its Americas segment within its laboratory products business, VWR competes primarily with Thermo Fisher Scientific and with Sigma-Aldrich.

The majority of VWR’s other competitors include laboratory equipment manufacturers, which sell direct to their customers, and smaller distributors that focus on specific geographies and product categories.

With respect to value-added services business, VWR competes with local service providers and life science companies, which offer laboratory management services to their clients, such as Thermo Fisher Scientific, PerkinElmer and Agilent Technologies and other service outsourcing companies.

In its EMEA-APAC segment within its laboratory products business, VWR has the broadest Pan-European platform, which provides it with an important competitive advantage.

VWR principally competes with Thermo Fisher Scientific for certain global customers, Sigma-Aldrich in chemicals and reagents, and with certain regional competitors, including Geyer and Omnilab in Germany and Dutscher in France and Switzerland in specific product categories.

With respect to valued-added services, VWR predominantly competes with small businesses operating on a regional basis.

5% shareholders pre-IPO
VWR Holdings  100%

Harry M. Jansen Kraemer, Jr.

Timothy P. Sullivan  

Dividend Policy

No dividends are planned.

Use of Proceeds

VWR intends to use the $561 million in proceeds from its IPO as follows:

to redeem all of its outstanding Subordinated Notes and approximately $2.7 million of accrued and unpaid interest on such Subordinated Notes (assuming a redemption date of October 17, 2014) and (ii) any remaining net proceeds from this offering to repay borrowings under its multi-currency revolving loan facility.

Prior to the completion of this offering, VWR will issue a conditional notice of redemption to the holders of the Subordinated Notes notifying such holders that, subject to the completion of this offering, VWR will use a portion of the net proceeds from this offering to redeem all of the Subordinated Notes at a redemption price of 100.0% plus accrued and unpaid interest thereon to the date of redemption.

As of June 30, 2014, $532.4 million in aggregate principal amount of Subordinated Notes were outstanding, including €126.9 million of Subordinated Notes denominated in euros (or $173.7 million on a U.S. dollar equivalent basis as of June 30, 2014 using an exchange rate $1.3690 = €1.00).

The Subordinated Notes mature on June 30, 2017 and have an interest rate of 10.75% per annum.

As of June 30, 2014, VWR had an aggregate of $9.6 million of outstanding borrowings under its multi-currency revolving loan facility. This facility will mature on April 3, 2016 and, as of June 30, 2014, the weighted average interest rate applicable to outstanding borrowings under such facility was 6.00%.