In a briefstatement titled "CRO changes private hands rather than IPO," Sterne Agee analyst Greg T. Bolan writes, "Over the pastseveral years, we have witnessed a dramatic increase in M&A within thepharma services industry, with 17 moderate-to-large deals occurring over thepast four years. Based on our knowledge of these deals, we believe valuationshave ranged from 10.0x to 14.0x TTM EBITDA. If PRA was sold for $1.3B and ourTTM $95MM EBITDA estimate is correct, KKR paid top dollar for the company."
As the title of Bolan's statement about the dealnotes, Raleigh, N.C.-based PRA International passed on the notion of doing aninitial public offering to become a publicly traded company, and instead isbeing sold by a middle market private equity firm, San Francisco-based GenstarCapital LLC, to a global investment firm, KKR. Genstar itself had acquired PRA in atake-private transaction in 2007 for $797 million.
The transaction, which is subject to regulatoryapprovals and other customary closing conditions, is expected to close in thethird quarter of 2013. According to Colin Shannon, president and CEO of PRA, "Thistransaction marks the next stage of our evolution. With KKR as our new partner,we look forward to working with them to accelerate our innovation and growthwhile continuing to make a difference not only for our clients but also for ourpeople."
PRA provides outsourced clinical developmentservices to the biotechnology and pharmaceutical industries with the help ofmore than 5,300 employees located in more than 50 offices worldwide. Since2000, PRA has performed approximately 2,000 clinical trials in some 80countries on behalf of more than 300 clients.
"PRA is a well-positioned global CRO platform ledby a talented management team with a long track record of success. As one ofthe fastest growing companies in the CRO sector, PRA is known for its strongclient relationships and differentiated therapeutic expertise," said said JimMomtazee, a member of KKR and head of its Health Care investing team. "PRAmanagement and KKR share the common ambition of building on this platform bycontinually improving service offerings to clients and providing compelling careeropportunities for employees."
KKR has made four previous acquisitions this year,and the PRA buyout will mark KKR's second such deal in the healthcare industry sincea $150 million investment in Sentio Healthcare Properties Inc.
Looking back on his firm's ownership of PRA, Jean-PierreL. Conte, chairman and a managing director of Genstar Capital, said, "In 2007we were attracted by the growth opportunities that existed within the CROindustry and particularly with PRA where we believed our leadership team underColin Shannon could accelerate growth and profitability initiatives tosuccessfully drive change at PRA and build the company on a sustained basis.This is an excellent outcome for our investors, PRA and their clients and,importantly, the company continues to have a strong partner in KKR. The PRAleadership team under Colin Shannon has delivered over 100 percent of what theycommitted to through a tough economic period. Genstar is proud to have been apart of building this company and working with such a capable leadership team."
"PRA has developed a niche in an attractivegrowing sector of the pharma services industry and is transforming clinicaltrials because of its people, innovation and transparency with customers,"added Rob Weltman, a Genstar managing director. "During our involvement withPRA, the company consistently grew revenues and profitability and deliveredstrong service to its customers across the globe."