ALPES S.A.: A JOINT VENTURE PROPOSAL (A)
David T.A. Wesley prepared this case under the supervision of Professors Henry W. Lane and Dennis
Shaughnessy solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Version: (A) 2006-02-07
As Dennis Shaughnessy, senior vice-president (VP) for Corporate Development and general counsel for Charles River Laboratories (CRL), prepared his presentation to the company’s board of directors,1 he wondered how the board would react to his request to invest up to $2 million in a Mexican joint venture
(JV) to create a state-of-the-art specific pathogen-free (SPF) egg farm.
Shaughnessy believed that the production and pre-incubation of SPF eggs for international agricultural vaccine companies in Mexico represented a long-term growth opportunity for CRL. The proposed joint venture with ALPES, a familyowned company that provided animal health products and services, would allow both companies to more aggressively exploit this opportunity and offered attractive financial returns for both partners.
Shaughnessy knew that to win over the board, he would also need to win over the support of company chief executive officer (CEO) Jim Foster. Without it, the JV would never come to fruition. But Foster viewed the proposed joint venture as a potential distraction for Specific Antigen-Free Avian Services (SPAFAS) as it
continued to expand rapidly in the United States. He also worried about the risks of investing in a country like Mexico, with an unstable currency and an uncertain market. He was especially concerned about the plan to partner with a small,
Charles River was a wholly owned subsidiary of Bausch & Lomb (B&L). As a result, its board was largely controlled by senior management of B&L.
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family-owned company that was not making a new investment of their own, but rather relying solely on CRL’s capital to fund the project.
Finally, after nearly 50
years in business, CRL had never successfully conducted business in Mexico.
CHARLES RIVER LABORATORIES
Founded in 1947 by Henry Foster, Charles River Laboratories was the global market leader in the commercial production and supply of laboratory animal models for use in discovery research and the development and testing of new pharmaceuticals. Foster took his company public in 1968, raising $3 million. In
1981, Foster sold the company to Bausch and Lomb (B&L) for $110 million.
Henry Foster continued as CEO under B&L until his son Jim succeeded him in
1992. Jim Foster was eager to expand the company but, at the time, B&L had been experiencing its own challenges, and was reluctant to invest the needed capital.
Nevertheless, Charles River Laboratories remained one of B&L’s most profitable divisions, at times contributing more than 10 per cent of B&L’s corporate net income. The company’s strategic growth objective was to grow its existing