Rumors that PPD’s owners intend to sell the CRO refuse to die, with reports emerging once again that it is on the block for about $5 billion.
It was almost the same time last year when news broke that PPD’s owners, private equity firms Carlyle Group and Hellman & Friedman, are looking for opportunities to sell the company or initiate an IPO. The company was said to be valued at around $8 billion at that time.
The sale this time, as reported by The Wall Street Journal, could value the company at around $5 billion. The company itself could be worth more than $9 billion including debt, and the WSJ report, quoting people familiar with the company’s finances, said PPD expects to post $2.8 billion in revenue or $700 million in earnings before taxes in 2017.
The Wilmington, North Carolina-based CRO has hired Goldman Sachs, JP Morgan Chase and Centerview Partners to help search for a potential buyer, WSJ’s report said, based on someone familiar with the matter.
The option for taking the company public has not been ruled out yet, but the person told WSJ that the owners aren’t actively preparing for an IPO. The private equity firms took PPD private with a $3.9 billion buyout in 2011. Taking the four dividends PPD has paid out into account, a $5 billion sale would hand them a turn worth more than three times their investment.
Since speculation of a possible sale emerged, PPD has spun off the once wholly owned X-Chem into a standalone company, completed its acquisition of Evidera, a provider of evidence-based solutions in examining effectiveness of new drugs, and expanded its GMP lab operations in Athlone, Ireland, by another 4,300 square feet.
If the deal goes through, it would become one of the largest of what’s called a leveraged buyout, where the acquisition was made using a large amount of borrowed money to meet the cost and the target company’s own assets are used as collateral for the loans.
Financial changes among CROs have been gaining pace recently. Earlier this year, healthcare data firm IMS merged with North Carolina-based CRO Quintiles to form the gigantic QuintilesIMS. INC Research, one of the largest CRO, for example, announced its IPO in November 2014, with 8.1 million shares of common stock offered to the public at a price of $18.5 per share. PRA Health Sciences, another CRO mogul, initiated almost in sync with INC Research a $306 million IPO in November 2014 and has most recently in this November offered an additional 7.5 million shares of common stock valued at around $58 apiece.