Avantor, Inc. (NYSE: AVTR), a leading global provider of essential products and services to the life sciences and advanced technologies industries, has entered into a definitive agreement to sell its clinical services business to Audax Private Equity for approximately $650 million. This strategic move is part of Avantor’s broader effort to optimise its business portfolio and concentrate on its core laboratory and production services.

Michael Stubblefield, President and Chief Executive Officer of Avantor, highlighted that this divestiture aligns with the company’s new operating model. “This transaction represents a pivotal moment for Avantor, enabling us to focus more sharply on strategic growth areas within our lab and production segments. It also allows us to strengthen our balance sheet, which is crucial for our future initiatives,” Stubblefield stated. He expressed confidence in Audax as the new owner, noting that they are well-positioned to drive the growth of the clinical services business.

Key Transaction Details

Avantor’s clinical services business, which includes kitting, biorepository services, and related equipment and ancillaries, is a significant component of its Laboratory Solutions segment. With approximately 800 employees, this segment is anticipated to generate around $200 million in annual revenue for 2024. The transaction is expected to close in the fourth quarter of 2024, subject to regulatory approvals and customary closing conditions.

Following the sale, Avantor is projected to receive approximately $475 million in after-tax cash proceeds. The company also expects a reduction of about $50 million in capitalized leases. The after-tax proceeds will primarily be used for debt reduction, which is expected to enhance Avantor’s financial stability and reduce interest expenses, bolstering its position for future investments and strategic growth.

The details of the transaction and its implications will be further discussed during Avantor’s third-quarter 2024 earnings call.

Strategic Rationale and Market Impact

This divestiture is part of Avantor’s strategy to streamline its operations and sharpen its focus on high-growth areas. By divesting its clinical services business, Avantor aims to allocate more resources towards expanding its core lab and production operations, which are critical to the company’s long-term growth strategy. The sale also reflects a broader trend in the life sciences sector, where companies are increasingly focusing on core competencies and high-margin segments to drive profitability.

Audax Private Equity, known for its strategic investments and operational improvements, is expected to leverage its expertise to enhance the growth potential of Avantor’s clinical services business. This acquisition aligns with Audax’s investment strategy of acquiring businesses with strong growth potential and providing them with the resources and support needed to thrive.

Advisory Roles

In this transaction, J.P. Morgan Securities LLC is serving as Avantor’s exclusive financial advisor, while Arnold & Porter is providing legal counsel. Moelis & Company LLC is advising Audax on the financial aspects of the deal, with Ropes & Gray LLP serving as legal counsel for Audax. These advisory roles are crucial in facilitating the smooth execution of the transaction and ensuring that all regulatory and legal requirements are met.

Avantor is a prominent player in the life sciences sector, providing a comprehensive range of products and services that support critical research and development activities. The company’s portfolio is utilised across a wide array of scientific applications, contributing to advancements in medicine, healthcare, and technology. With operations in over 180 countries, Avantor serves more than 300,000 customers worldwide, reinforcing its role as a key partner in the global scientific community.

  Audax Private Equity, Avantor Inc., biorepository services, clinical services, J.P. Morgan Securities LLC, Moelis & Company LLC, Ropes & Gray LLP