eResearch Technology goes private as lawyers investigate acquisition

On Tuesday, eResearch Technology ($ERT) announced that it would go private after being acquired for $400 million by Genstar Capital. On Wednesday, more than 10 law firms announced that they would be investigating eResearch's board of directors over the deal.

Genstar Capital, a private equity and investment firm, will pay $8 a share for eResearch stock, according to a report from Reuters. By taking in eResearch, Genstar will boost its life sciences portfolio, which already includes PRA International and Catalent Pharma Solutions. Shareholder approval is still needed and the transaction is expected to be completed during the third quarter.

"We are pleased that this transaction appropriately recognizes the value of ERT as one of the leading vendors to the pharmaceutical industry, while providing our stockholders with an immediate cash realization for their investment in ERT," said Elam M. Hitchner III, chairman of ERT's special committee of independent directors, in a statement. 

But while Genstar and eResearch executives may have been celebrating the acquisition, others were questioning the legitimacy of it, and now some law firms are investigating the deal. Since Genstar will pay $8 for each share of eResearch stock owned--a 2% premium to Tuesday's closing price--lawyers think eResearch shareholders may not be receiving a fair piece of the pie, especially when analysts have valued the company as high as $11 a share, according to Newman Ferrara, one of the law firms looking into the deal.

However, ERT said the offer price represents a premium of about 38% over its average closing share price for the 90 trading days that ended April 9, and 42% over the 52-week average.

As Reuters noted, equity firms are playing the biotech field, and Genstar certainly isn't a rookie in the acquisition game. The law firms are only probing for possible misconduct and scouting for angry shareholders who might want to make a case out of it. Of course, if the investigations culminate into legal action, FierceCRO will have something to say about it.

- read the Reuters story here
- learn more from one law firm's press release
- read a statement from eResearch on the acquisition