PPD agrees to $3.9 billion offer

The Wilmington drug researcher has a strong presence in the Triangle.

dbracken@newsobserver.comOctober 4, 2011 

PPD, one of the Triangle's largest drug-research companies, ended months of speculation about its future on Monday by agreeing to be acquired by two private equity firms for $3.9 billion.

The Carlyle Group and Hellman & Friedman are paying $33.25 per share for the company, a 30 percent premium over where PPD shares closed Friday.

PPD is part of a group of companies active in the Triangle, along with Quintiles and INC Research, that are known as contract research organizations. CROs help pharmaceutical and biotechnology companies research, test and market new medicines.

The CRO industry has experienced a wave of consolidation in recent years as companies look to expand into emerging markets where there is big potential for new medicines.

It has also become a favorite industry for private equity firms, which like CROs because of their strong cash flow.

Last year, a private equity firm and a Canadian pension fund acquired Raleigh-based INC Research.

Although private equity firms often revert to cost-cutting to improve the performance of their companies, that is unlikely to occur at PPD, said Tim Evans, an analyst with Wells Fargo Securities.

"PPD is a pretty lean organization already, and I don't see that there is a lot of fat to cut," he said.

PPD is one of the world's largest CROs, with more than 11,000 employees and $1.47 billion in revenue last year. The company is based in Wilmington, where it has about 1,500 employees, along with roughly 1,400 workers in the Triangle.

Rumors have been swirling for months that the company was on the market.

Evans said the timing of the buyout is logical given that PPD is at a crossroads in terms of its corporate leadership. Pharmaceutical Product Development was founded 25 years ago by Fred Eshelman, an alumnus of UNC-Chapel Hill.

Eshelman, who now serves as executive chairman, returned briefly to run the company this summer after former CEO David Grange retired in May. Last month, PPD's board of directors named Raymond H. Hill CEO and gave him a spot on the board.

Eshelman said in a statement Monday that the buyout was a good deal for shareholders and the result of years of hard work by PPD employees.

"I am very proud of what our employees have accomplished together," he said.

Bloomberg News earlier reported that most bids for PPD were between $33 and $38 per share. Although PPD can solicit other bids over the next 30 days, Evans said he doesn't anticipate any higher bidders emerging, as the company has already said it has no interest in selling to another CRO.

PPD expects the deal to close in the fourth quarter, after which it will become a private company. One of PPD's acquirers, The Carlyle Group, filed to go public in early September.

PPD shares closed up $6.62 at $32.28 Monday. The stock is up 29 percent over the last year.

Bracken: 919-829-4548

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