Parexel: M&A likely to continue despite $200m stock repurchase plan
As of June 30 - the end of its fiscal year - contract research organisation (CRO) Parexel had approximately $207m cash and a line of credit worth $250m available.
Yesterday, the firm announced it a stock repurchase programme, authorising the buy-back of up to $200m of its common shares as part of its commitment “to optimising the capital structure of the Company,” CEO Josef von Rickenbach said in a statement.
“The strength of our business fundamentals allows us to demonstrate our confidence through this stock repurchase program,” he continued, adding the firm was “positive about the long-term growth and profitability opportunities that lie ahead of us.”
While the programme authorises $200m worth of stock, Parexel is not obligated to acquire any. However, last year the firm approved a share repurchase scheme for $150m on June 2, and less than two weeks later announced it was buying back the said amount from Goldman Sachs.
For FY2016, Citibank analyst Garen Sarafian estimates the CRO will repurchase $175m of stock and continue an M&A strategy which has seen the addition of numerous companies over the past few of years.
“Despite today’s announcement, we believe Parexel is committed to tuck-in M&A, which management indicated was a priority for capital allocation as recently as last quarter’s earnings call,” Sarafian said in a note.
“We expect the company will continue to focus on broadening its asset base and see key areas of focus including among others, technology, clinical expertise, and to a lesser extent expanding geographies.”
Any deals would most likely be bolt-ons, similar in vain to the additions of pharmacovigilance firm QSI bought in April, RTSM supplier ClinIntel acquired last October, and Atlas Medical in July 2014 which added Middle-Eastern trial sites to Parexel’s network.
