The wheeling and dealing in the CRO industry is showing no signs of slowing down. This morning some top business news wires are spreading an insider's account of the Carlyle Group's attempt to negotiate a deal to buy out PPD ($PPDI) for about $4 billion. Bloomberg first reported that the Carlyle Group has an exclusive spot at the bargaining table and Reuters quickly followed with its own account based on a source close to the talks.
According to Reuters, Carlyle may want to join forces with another private equity group before it settles on a price. And analysts estimate that PPD--a big CRO which specializes in pricey late-stage clinical trials--could fetch $35 to $37 a share. Investors have been paying close attention to PPD ever since the board spurred management to take a close look at its strategic plan. Yesterday afternoon rumors about a possible deal helped drive an 18% spike in PPD's share price. Shares are up 6% in pre-market trading to $33.30.
Several big trends have been driving the recent spate of CRO deals. Private equity operations discovered they could make good money buying up CROs and selling them later. Several Big Pharma operators like Sanofi and Pfizer, meanwhile, have been striking exclusive deals with a select number of CROs, helping drive a wave of consolidation as CROs bulk up to compete for the business.
Analysts expect the big CROs that dominate the business will control nearly half the market by 2015, giving private equity players like Genstar--which bought PRA for $700 million--an opportunity to capitalize on the buyout trend. PPD has benefited from that trend as well, building a global operation with 11,000 employees.
The sources talking to Bloomberg and Reuters, though, are also making it clear that there's no done deal on the table for PPD. This is one buyout that could still go south, making this a risky bet for investors.