Parexel has agreed to be acquired for approximately $5 billion by Pamplona Capital Management, which plans to take the CRO private, the prospective buyer and acquisition target said today.
The deal ends a turbulent two years in which Parexel has sought to contain costs following disappointing results.
On May 4, Parexel revealed plans in a regulatory filing to eliminate about 6% of its workforce, “approximately 1100 to 1200 jobs,” as part of an expansion of a restructuring disclosed in January that would have cut 390 jobs. Parexel employs 19,600 people worldwide.
Parexel said it would incur pre-tax charges of between $49 million to $63 million toward the expanded restructuring between the company’s current fiscal year, which ends June 30, and Parexel’s FY 2018, which begins on July 1.
A day earlier, Parexel reported results for the first nine months of its fiscal year showing a 10% year-over-year slide in GAAP operating income, to $143.2 million, on service revenue that rose 0.2% over the first nine months of the company’s FY2016, to $1.560 billion.
Worse, during Parexel’s third fiscal quarter, GAAP operating income plunged 57%, year-over-year to $29.9 million, while service revenue increased 0.4% to $529.3 million.
“As our results over the past year show, the market for biopharmaceutical services is evolving. We believe the more flexible corporate structure afforded by this transaction will better position us to advance Parexel’s strategy in light of these realities and to shape the Company to best capitalize on our exciting market opportunities,” Parexel chairman and CEO Josef von Rickenbach said in a statement.
The deal continues the wave of consolidations among organizations to which biopharmas have increasingly outsourced operations.
Just last week, contract development and management organization Albany Molecular Research (AMRI) agreed to be acquired by affiliates of The Carlyle Group and GTCR for about $922 million cash, while JSR Life Sciences announced it would acquire mammalian cell-line development specialist Selexis and integrate it with KBI Biopharma. Last month, Thermo Fisher Scientific said it planned to acquire Patheon for approximately $7.2 billion cash.
As for Parexel, Pamplona has offered to acquire all outstanding shares of the company for $88.10 per share. That represents a 27.9% premium over Parexel’s closing share price on May 5, the day before speculation emerged publicly that the company was a potential acquisition target.
The deal share price also represents a 38.5% premium to the volume-weighted average closing price of Parexel’s common stock for the 30 days ending May 5, and a 23.3% premium to the Company’s undisturbed 52-week high.
The transaction is set to close early in the fourth quarter of 2017, subject to approval by a majority of Parexel shareholders and other customary closing conditions. Parexel said it expects to hold a Special Meeting of Shareholders to vote on the proposed acquisition by Pamplona “as soon as practicable” after the mailing of the proxy statement to shareholders.
Parexel’s board has unanimously approved the deal and intends to recommend shareholder approval of the agreement with Pamplona.
Pamplona manages over $10 billion in assets across a number of funds for clients that include public pension funds, international wealth managers, multinational corporations, family offices, and funds of hedge funds.
Investors responded to the news by sending Parexel’s share price up almost 4% from yesterday’s close of $83.92, to $87.10 in premarket trading as of 9 a.m.
“Today’s announcement is the culmination of a comprehensive review of the opportunities available to the Company, including interest solicited and received from multiple parties with the assistance of independent financial and legal advisors,” von Rickenbach added.