Regulatory News:
Eurofins (Paris:ERF):
Eurofins Scientific (EUFI.PA), a global scientific leader in
bioanalytical testing, announces that the additional independent
forensic audit of Eurofins’ cash pooling arrangements and cash
situation in its consolidated financial statements as at 31
December 2023 has been completed. The results of the thorough
forensic examination found no evidence indicating material
misstatements in Eurofins’ cash statements, concerns with its cash
management and accounting practices or issues with the authenticity
of its documentation.
The forensic tests performed by Ernst & Young Paris (EY)
provide direct refutations to the baseless allegations in short
seller reports published by Muddy Waters, LLC (MW) in June and July
2024:
- No indication of irregularly altered documents was identified
when performing dedicated forensic tests to detect potential data
authenticity anomalies for all the bank statements, bank
confirmations and statutory audit reports used in tests.
- The cash pooled at national level is up-streamed through a
second layer of cash-pooling to centralise the available cash at
the Group’s headquarters. The Group invests the cash surplus on
short-term fixed deposit accounts which correspond to the Cash
Equivalents reported.
- All the tests were applied to all bank accounts selected
through the sampling methodology. They identified two individual
exceptions above €100k each totalling an overstatement of €1.2m.
These exceptions, already identified during the 2023 year-end
audit, were considered immaterial at that time (0.1% of the Cash
and Cash Equivalents balance as at 31 December 2023).
The audit report is available on the Investors section of the
Eurofins website under the tab “Eurofins response to MW” accessible
here.
Previous press releases published on 25 June 2024, 03 July 2024,
05 July 2024 and 11 July 2024 by Eurofins already refuted all the
most blatantly false, misleading and baseless allegations by MW. On
the topic of real estate leased by subsidiaries of the related
party ABSCA to Eurofins companies, which had already been copiously
disclosed in Eurofins’ annual reports for years, including
comparison of lease terms with related parties with lease terms
with third parties over the last 5 years, Eurofins has already
disproved in those aforementioned recent press releases that the
claim by MW that these leases would not be at arm’s length is
wrong, providing specific details for transactions that occurred
over the last 10 years.
Over the last three months, Eurofins teams have located and
analysed archived data regarding transactions that occurred between
10 and 25 years ago. MW falsely alleged (in particular in the bold
underlined text thereafter) that “Dr. Martin’s CRE portfolio
consists of ~36 CRE properties as of 2023. He appears to have no
meaningful tenants other than Eurofins. He acquired many of these
properties from the sellers of businesses to Eurofins –
finding businesses with real estate for
Dr. Martin to acquire reportedly was a focus of Eurofins’ M&A.
Eurofins supposedly overpaid for operating
businesses in order to subsidize Dr. Martin’s real
estate purchases. Dr. Martin reportedly rented these properties
back to Eurofins at generally above market
rates”.
Eurofins went back 25 years in its archives to identify any
situation where an ABSCA-related entity acquired a property in
conjunction with an acquisition of a laboratory by Eurofins, in
order to reduce the investment by Eurofins associated to this
business acquisition while protecting long-term use of the building
by Eurofins.
Eurofins identified 19 such transactions in its archives. Such
transactions occurred only between 10 and 25 years ago, up to the
end of 2013. Before that time, Eurofins had much less access to
capital and higher indebtedness relative to its profitability. It
has been already widely disclosed that Eurofins would not have been
able to acquire all the laboratory buildings bought by the holding
ABSCA of its main shareholder at that time without exceeding
acceptable financial leverage ratios. By examining acquisition
proposal files and pre-acquisition accounts and, when available,
post-acquisition accounts when the companies had not been
immediately merged into existing Eurofins companies, Eurofins teams
calculated ratios for each acquired operating business based on
Enterprise Value (EV) paid divided by the revenues or EBITDA of the
company in the year prior to its acquisition.
The arithmetic and EV-weighted means and median of EV-on-EBITDA
ratios were found to be in a range between 5x and 7x and
EV-to-revenues ratios arithmetic and EV-weighted means and median
in a range between 0.7x and 1.1x. At such low absolute valuation
multiples, MW’s claim that Eurofins “overpaid for operating businesses in order to
subsidize Dr. Martin’s real estate purchases” are clearly confirmed
to be completely unfounded.
MW’s claims can be further disproven by examining all 94
acquisitions of businesses completed by Eurofins during the same
years as the 19 abovementioned operating businesses acquisitions
(spanning between 1999 and 2013) when Eurofins acquired a company
using a building that an ABSCA-related affiliate acquired. For all
94 acquisitions performed during those years, the arithmetic mean
of the EV-to-EBITDA multiple paid by Eurofins was around 8x, as
were the EV-weighted mean and median as well. For the
EV-to-revenues ratio of the same 94 acquisitions, the arithmetic
and EV-weighted means and median were all around 1x.
These results clearly validate that acquisition multiples paid
by Eurofins for businesses that involved related party real estate
transactions were in line with (if not lower than) the average
acquisition multiples paid by Eurofins for all acquisitions (with
or without real estate transactions) completed during the same
years. It also only concerned 19 of the 94 companies acquired in
the same years.
Of course, “finding businesses with real estate for Dr. Martin
to acquire” was obviously never a focus for Eurofins. Eurofins
always only focused on acquiring businesses that fit with its
strategy to complement its geographic and technology portfolio,
contribute to reaching scale in each of its chosen markets and
achieve a return on the cost of those acquisitions in excess of its
hurdle rate for return on capital. Eurofins has already confirmed
that its policy is, and always has been, to assess all related
party transactions (including leases) to ensure that they are
performed at arm’s length terms and therefore refuted MW’s claim
that “Dr. Martin reportedly rented these properties back to
Eurofins at generally above market
rates”.
Comment from Dr Gilles Martin, Eurofins CEO: “I am pleased that
Ernst & Young Paris was able to confirm, through their thorough
cash audit, the accuracy of our financial reporting as well as the
high degree of integrity of our systems and controls. I am also
satisfied that the results of our analysis of archived data
clearly, and once again, disprove MW’s unfounded claim that
Eurofins overpaid for acquisitions to subsidise related party real
estate transactions.
These results speak for themselves, refute the slanderous
allegations by Muddy Waters, and reaffirm our dedication to
transparency and the reliability of information published by
Eurofins. These are standards our shareholders, bondholders,
employees and other stakeholders should, and do, expect from
Eurofins. This stands in stark contrast to MW’s self-serving
‘opinion journalism’ based on groundless allegations and misleading
information that seems optimised for malfeasance to serve the
interests of MW and parties potentially acting together with
MW.
As always, Eurofins remains committed to forcefully defending
itself against these and any future slanderous allegations, from
both MW and any other source, aiming to confuse and deceive the
investing public.”
About Eurofins – the global leader in bio-analysis
Eurofins is Testing for Life. The Eurofins Scientific SE network
of independent companies believes that it is a global leader in
food, environment, pharmaceutical and cosmetic product testing and
in discovery pharmacology, forensics, advanced material sciences
and agroscience contract research services. It is also one of the
market leaders in certain testing and laboratory services for
genomics, and in the support of clinical studies, as well as in
biopharma contract development and manufacturing. It also has a
rapidly developing presence in highly specialised and molecular
clinical diagnostic testing and in-vitro diagnostic products.
With ca. 62,000 staff across a decentralised and entrepreneurial
network of more than 900 laboratories in over 1,000 companies in 62
countries, Eurofins offers a portfolio of over 200,000 analytical
methods to evaluate the safety, identity, composition,
authenticity, origin, traceability and purity of a wide range of
products, as well as providing innovative clinical diagnostic
testing services and in-vitro diagnostic products.
Eurofins companies’ broad range of services are important for
the health and safety of people and our planet. The ongoing
investment to become fully digital and maintain the best network of
state-of-the-art laboratories and equipment supports our objective
to provide our customers with high-quality services, innovative
solutions and accurate results in the best possible turnaround time
(TAT). Eurofins companies are well positioned to support clients’
increasingly stringent quality and safety standards and the
increasing demands of regulatory authorities as well as the
evolving requirements of healthcare practitioners around the
world.
The Eurofins network has grown very strongly since its inception
and its strategy is to continue expanding its technology portfolio
and its geographic reach. Through R&D and acquisitions, its
companies draw on the latest developments in the field of
biotechnology and analytical chemistry to offer their clients
unique analytical solutions.
Shares in Eurofins Scientific S.E. are listed on the Euronext
Paris Stock Exchange (ISIN FR0014000MR3, Reuters EUFI.PA, Bloomberg
ERF FP).
Until it has been lawfully made public widely by Eurofins
Scientific S.E. through approved distribution channels, this
document contains inside information for the purpose of Regulation
(EU) 596/2014 of the European Parliament and of the Council of 16
April 2014 on market abuse, as amended.
Important disclaimer:
This press release contains forward-looking statements and
estimates that involve risks and uncertainties. The forward-looking
statements and estimates contained herein represent the judgment of
Eurofins Scientific S.E.’s management as of the date of this
release. These forward-looking statements are not guarantees for
future performance, and the forward-looking events discussed in
this release may not occur. Eurofins Scientific S.E. disclaims any
intent or obligation to update any of these forward-looking
statements and estimates. All statements and estimates are made
based on the information available to the Company’s management as
of the date of publication, but no guarantees can be made as to
their completeness or validity.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241021640696/en/
Notes to Editors:
For more information, please visit www.eurofins.com or
contact:
Investor Relations Eurofins Scientific SE Phone: +32 2 766 1620
E-mail: ir@sc.eurofinseu.com
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