Private Equity Changes CRO Landscape With PPD Buyout (PPDI, CRL, CVD, PRXL)

October 3, 2011 · Filed Under Financial, M&A, R&D, Research 

The world of contract research organizations is changing.  The unexpected news hit the wire this Monday that Pharmaceutical Product Development, Inc. (NASDAQ: PPDI) is being acquired.  This was no gobble-up acquisition where a larger public company preyed on a smaller company.  This was a private equity transaction.

PPD has entered into a definitive merger agreement to be acquired in a $3.9 billion cash buyout by affiliates of The Carlyle Group and Hellman & Friedman.  The terms of the deal call for the assumption of liabilities and for the common holders to receive $33.25 per share in cash.  Before today, the trading range had effectively been $25 to $32 but the stock closed at $25.66 on Friday and that implies a near-30% premium.

PPD has also been north of $40 in the last 5-year period.  That being said, the board of directors has unanimously approved the deal and is recommending that shareholders vote for the transaction.

The attraction here is the CRO business, which aims to help pharmaceutical and biotech companies develop new drugs at lower costs and with less inside oversight.

As you would expect, the deal is subject to approvals and to regulatory reviews, but the transaction is not subject to any financing conditions. The funds combined between Hellman & Friedman and Carlyle were listed as nearly $22 billion and it was also noted that external debt financing is being provided by Credit Suisse, JP Morgan, Goldman Sachs and UBS.

PPD does have a “Go Shop” provision as the terms allow the company to go solicit acquisition proposals from third parties for a period of 30 calendar days from the date of the merger agreement.  PPD can also respond to unsolicited proposals that the board “determines are reasonably likely to result in a superior proposal.”  Carlyle and Hellman & Friedman were given a “right to match” term and the current merger is expected to close in the fourth quarter of 2011.

PPD has offices in 44 countries and more than 11,000 professionals worldwide.

Charles River Laboratories International Inc. (NYSE: CRL) is up 1.5% at $29.05 and its 52-week range is $27.76 to $42.84.

Covance Inc. (NYSE: CVD) is up 1.3% at $46.07 and the 52-week trading range is $43.00 to $63.86.

Paraxel International Corp. (NASDAQ: PRXL) is up 3% at $19.45 and its 52-week range is $15.26 to $27.91.

JON C. OGG

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