Warnex has entered into a binding agreement with a private, undisclosed company to sell its wholly-owned Analytical Services division. The unit provides a variety of quality control services, including chemistry, chromatography, microbiology, method development and validation, and stability studies.

Warnex will receive $400,000 in cash, a cash payment equal to the working capital of the division — approximately $700,000 — on the Closing Date, a 15% passive equity interest in the purchaser, and “other valuable consideration,” according to a Warnex statement. The transaction is expected to close around January 15, 2012.

All of the operations of the Analytical Services division will be centralized at Warnex’s Neopharm Blainville facility, with Warnex’s lease obligations for that portion of such facility currently occupied by the division being assumed by the purchaser. Warnex will provide certain transitional services to the purchaser in order to ensure the orderly transfer of this division. The purchaser has stated its intention to significantly enhance the current operations of the Analytical Services division.
Warnex intends to use the proceeds from this transaction to further reduce its long-term debt and for working capital purposes.

“This transaction is consistent with our strategic plan and the commitment we made to reduce long-term debt. It also allows us to retain substantial upside in the Analytical Services business that we pioneered,” said Michael Singer, chairman of Warnex. “The sale of our Analytical Services division serves as another important step in the process of improving our balance sheet and positioning the Company and its stakeholders for future success.”