At the midpoint of the proposed range, INC would command a market value of $1.1bn, which would put it at about the same market value as PRA, which was purchased by private equity company KKR for $1.3bn last year. PRA, however, filed for a $375m IPO.
The market value reveals a significant rise in value since Avista and the Ontario Teachers' Pension Plan acquired INC in 2010 from Crosspoint Venture Partners and Adams Street Partners for about $600m.
INC said it estimates that the net proceeds from the offering will be approximately $135m, after deducting underwriting discounts and commissions and estimated expenses. However, the underwriters may also purchase up to a maximum of about 1.2m additional shares of stock, which could raise the price of the offering to $155.9m, assuming that the stock is offered at $18.50 per share.
Over the previous nine months, not including October, net service revenue increased 25% to $596m, driven by awards and growth in the CNS and oncology therapeutic areas. Net income totaled $26.3m, while at the end of the quarter, INC had a backlog of $1.5 bn, up 10% from the same quarter last year. As of September 30, the company had $592 million of debt and will use IPO proceeds to pay it down.
INC also estimates that outsourcing will continue to climb in the $56.3bn total addressable market for CROs, with a penetration rate expected to climb to 46% of the market by 2018.
Plans for IPO
“Concurrently with the closing of this offering, we intend to refinance our existing senior secured credit facilities with new senior secured credit facilities in an aggregate principal amount of $525m, consisting of a $425m term loan facility and a $100m revolving credit facility pursuant to an Amended and Restated Credit Agreement among INC Research, LLC, our wholly owned subsidiary, as the borrower, the lenders party thereto, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the other parties thereto,” INC writes in the IPO.
“We intend to use the proceeds of the $134.0 million of additional term loan borrowings, along with the proceeds of this offering…to redeem all of our outstanding Notes and pay any redemption premiums, make-whole interest and related fees and expenses,” the company adds.