Neogen Acquires Queensland Animal Genetics Laboratory – Neogen Corporation (NASDAQ:NEOG)

Quick Take

Food and animal safety company Neogen (NEOG) has announced the acquisition of the assets of The University of Queensland Animal Genetics Laboratory [AGL].

AGL will serve as Neogen’s headquarters in Australia as it provides a range of animal and genetics testing services to the livestock industry and breed societies on the continent down under.

Neogen gains a well-known laboratory to expand its capabilities and coverage capacity throughout the greater Oceania region.

Target Company

The Gatton-based laboratory was founded in 1985 to assist the Australian cattle industry in tracking and maintaining the health of its livestock.

Management is headed by acting Head Associate Professor Jenny Seddon.

In 2016, the laboratory passed the 500,000th cattle sample, and the new combination looks to not only continue its testing services for the large cattle industry, but to also expand into the sheep market, which is also large, and other animal markets.

Acquisition Terms and Rationale

Neither entity disclosed the acquisition price or terms and Neogen didn’t file an 8-K or disclose a change in financial guidance, so I presume the transaction was for a non-material amount.

The lab had $3.1 million in revenues and already had a preexisting relationship with Neogen’s GeneSeek genomic unit.

The combination of AGL and Neogen promises to expand Neogen’s genetic testing footprint in the greater Australia region. As such, the price paid was likely based on a strategic consideration rather than on a revenue multiple.

The laboratory will be renamed GeneSeek Australasia and will provide services to Australia, New Zealand and the Oceania region. Oceania is considered to include Australia, Melanesia, Micronesia and Polynesia and has a population of more than 41 million.

As Neogen stated in the deal announcement,

With both state-of-the-art animal genetic facilities and comprehensive bioinformatics to interpret genetic test results, Neogen offers animal owners unparalleled identity and trait determination and analysis. For example, Neogen can provide a cattle producer with DNA test results that can predict that animal’s performance in the herd on such traits as the ability to gain weight, pregnancy rate, calving ease, and susceptibility to disease. Neogen provides veterinary genomic solutions for cattle, both beef and dairy, swine, sheep, dogs, and poultry.

Dr. Jason Lilly, Neogen VP of Corporate Development added,

AGL has excellent facilities, and an outstanding reputation with its customers, which include research institutions, breed societies, and large pastoral companies. AGL’s management and scientific staff will remain with the company, and will continue their work to help Neogen grow our genomics business. Adding AGL’s complementary expertise, local support, and impressive customer base strengthens our animal genomic capabilities and presence. The GeneSeek Australasia laboratory near Brisbane will provide our Australian customers the same access to the best animal genomics technology as our customers elsewhere, and also offers all the benefits of dealing directly with a well-known entity in Australia.

With the addition of AGL and the creation of a pan-Oceania coverage footprint, Neogen will be able to offer a range of animal genetic services via a locally well-known laboratory.

The deal promises to catapult Neogen to the premier position for all manner of livestock and animal genetic health and predictive testing.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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