PPD accepts $3.9bn offer

By Nick Taylor

- Last updated on GMT

Related tags Equity analyst Contract research organization

PPD has agreed to be acquired by two private equity firms for $3.9bn (€3.0bn) in cash.

The Carlyle Group and Hellman & Friedman, with financial support from four banks, have agreed terms with PPD after months of negotiations. PPD expects the deal to close in the fourth quarter, after which the contract research organisation (CRO) will have the benefits of private ownership.

We suspect the flexibility to investment for the long-term offered by the private markets is an attractive alternative for CROs that are gearing up for a large bolus of business to be transferred to them by large pharmaceutical companies​”, John Kreger, equity analyst at William Blair, said.

PPD will join Quintiles as a leading, privately owned CRO. In August, David Windley, equity analyst at Jefferies & Company, said Quintiles has entered into “some fairly exotic contract structures and strategic relationships​” and going private could give PPD the freedom to make similar deals.

Other CROs may also be attracted by the flexibility of private ownership. “We would not be surprised to see more transactions of this type, albeit not likely of this scale, as the CRO industry continues to evolve with pharma throughout the next several years​”, Kreger said.

Private equity firms have shown “a healthy level of interest in CROs​”, Windley said, despite, possibly short-term, problems the sector is facing. Both private equity firms emphasised the need to continue to expand capabilities.

Fred Eshelman and PPD’s management team have built a leading and extremely high quality global research and services organisation. We look forward to helping expand and enhance PPD’s platform and broad spectrum of therapeutic expertise​”, Karen Bechtel, managing director at Carlyle, said.

Agreeing a price

PPD has 30 days to find a better offer but, considering the length of negotiations, analysts think a rival bid is unlikely. “We view odds of a competitive bid as exceptionally low​”, Eric Coldwell, equity analyst at RW Baird, said.

The agreed price, $33.25 a share, is below figures reported in August but the PPD board universally accepted the deal and analysts have been positive. “The purchase price is at a premium to financial deals over the last six years​”, Windley said.

Shares in PPD soared 25.8 per cent following the news to close just short of the agreed deal price at $32.28.

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