Indianapolis-based Harlan Laboratories—a powerhouse in the lab-animal business that’s maintained a super-low profile since its founding 83 years ago—sold out last month in fittingly quiet fashion.
Harlan and the buyer, United Kingdom-based Huntingdon Life Sciences, confirmed the purchase but would not disclose terms.
Whether the merger of the former rivals is good for Indianapolis will play out in the coming months. Huntingdon has 1,200 employees, most of them in the United Kingdom and Princeton, N.J. Harlan has about 2,300 employees worldwide, including 300 locally.
On the one hand, as IBJ reported last year, Harlan had been weighed down by debt, which credit analysts deemed a serious liability. On the other, merging competitors sometimes leads to deep staff cuts.
Harlan Chief Financial Officer Doug Vaughan offered reassuring words: “There are no plans to have any layoffs in the area, and Huntingdon is planning to continue an Indianapolis presence.”
He added, “We would hope our business will grow locally.”
But when IBJ asked a Huntingdon spokesman whether the Indianapolis operations were likely to be reduced, maintained or increased, he was noncommittal.
“Our aim is to build a dynamic, innovative and successful company with a strong platform for future growth and investment, and to do this we are conducting a thorough review of our total capacity, resources and cost structure to see how that relates to our business forecasts,” Communications Director Andrew Gay wrote in an email.
“So it is too soon to make comment on any specific site or operations until we work through this over the coming months.”
Already out of the picture is Harlan CEO Hans Thumen. Contacted via LinkedInmail, Thumen declined to comment. But Vaughan said he left when the deal closed because “the combined company only needed one CEO.”
Harlan and its competitors tend to keep a low profile, in part because that minimalizes conflicts with activists who routinely target firms in the animal-testing industry.
Harlan found itself splashed into the headlines last year for a different reason—a daunting debt load left over from the 2005 leveraged buyout of the company by San Francisco-based Genstar Capital.
In early 2013, Harlan nearly engineered a $305 million restructuring, but the deal fell apart. Last fall, IBJ reported that Genstar might sell the company to avert default on $280 million in debt due to be paid off in July 2014.
Harlan’s challenges extended beyond leverage. S&P said in a report last year that the company experienced “double-digit revenue contraction” after sales reached $326 million in 2012.
Analysts say the problem was not the lab-animal business, a relatively stable field where it generates about half its revenue and is the No. 2 player worldwide. It was the other half, contract research, a segment where Harlan was losing market share to larger, better-capitalized players.
S&P said in a report last fall that some of Harlan’s problems were self-inflicted.
“The company has experienced several operational missteps over the past few years that cause us to assess management and governance as weak,” the agency said pointedly in a report.
Vaughan said Harlan’s debt was an issue to the extent that some outsiders perceived it to be a problem. But he said that’s not what drove the sale.
“Our owners just felt it was a good time to market and sell the company,” he said. “We were quite pleased that a company as strong as Huntingdon and as good a fit ended up buying us.”
Simon stiff-arms China
Simon Property Group Inc. spun off its strip centers and smaller malls into a new public company this spring in part so it could focus on international opportunities.
But if you think CEO David Simon is salivating over the gigantic Chinese market, you’re mistaken.
The company began striking partnerships in China about a decade ago, and by 2009 it owned three shopping centers with a total of more than 1.7 million square feet. But it reversed course later that year—selling its joint venture interests for $29 million, resulting in a $20 million loss for Simon.
“Not to say that one day down the road we might not be there, but we have no current intentions of doing anything in China,” David Simon said this month at a National Association of Real Estate Investment Trusts investor forum in New York City.
“People build malls there that are big. And then you find out that, for whatever reason, another guy is building a mall across the street that’s bigger. That’s usually not a good environment to be in.”•