Labstat International

Company Summary

Located in Kitchener, Ontario, Labstat was established in 1976 and has grown to become one of the largest independent third party tobacco testing companies in the world supporting regulatory testing and research. Labstat tests all forms of tobacco products including cigarettes (mainstream and side stream tobacco smoke), whole tobacco, snus and smokeless tobacco as well as the anticipated testing of electronic cigarettes. Labstat has carried out over 100 Health Canada projects and wrote and validated all 45 of the sanctioned tobacco smoke testing methods for Canada; the first country to implement tobacco regulation. These testing methods are now considered to be the worldwide model for tobacco testing regulation. The senior management team of Labstat is comprised of industry recognized scientists and technical staff, who collectively have over 120 years of experience in the industry. Labstat employs between 130 and 160 staff during its peak business. Labstat provides tobacco chemistry and toxicology testing services for tobacco manufacturers, governments, and public and private entities alike. Labstat is a global business with customers in North America, Europe, South America, New Zealand and Asia.

Industry: Industrials:  Laboratory Testing Services
Capital Invested: $47.20 million (2 tranches)
Annualized Distribution to Alaris: $7.50 million
Website: www.labstat.com
Partner Since: June 2012

"Labstat had a history of capitalizing its business with funds secured through the Canadian and U.S private equity markets.  In 2011, when its majority shareholder indicated that its investment fund would be closing, Labstat once again found itself in the market for a recapitalization transaction.  In this transaction the founding shareholder, Dr. William Rickert, along with the management shareholders were looking for an investment partner whose interests, including investment timeline, would be aligned with a view to supporting the long-term growth of the Company.

Labstat’s founder and management shareholder’s considered other financing options but were seeking an investment partner that would allow management to control the strategic direction of the Company.  While private equity investors expressed interest in Labstat’s cash flow and long-term prospects, such investments would require a control position for the private equity investor.  Further, the private equity market was unappealing to the founding and management shareholders as the Company wished to stabilize its capital structure rather than facing the potential of having to return to the private equity market every three to five years when timing of future transactions may or may not be favorable.

The Alaris proposal to create a partnership with Labstat was ideal as the financial contribution made by Alaris together with financing provided by Labstat’s senior lender allowed the Company’s Founder to acquire control of the common equity of the Company.  Further attractive deal points included: Alaris’ long term investment strategy, lower than private equity return expectations, and distributions which increase or decrease based on revenue performance.

After careful consideration, it was with pleasure that Labstat’s founder and management team selected Alaris as its long-term capital partner."

- Kimberly Stevenson Chow, Chief Financial Officer, Labstat International ULC