Pharmaceutical services company Parexel, a major local employer, has agreed to be acquired for $5 billion – the latest in a series of merger and acquisitions sweeping through an industry that is centered in the Triangle.
Boston-based Parexel announced Tuesday that it has agreed to be acquired by private equity firm Pamplona Capital Management for $88.10 per share, a 28 percent premium over where the stock was trading before published reports of a possible deal emerged last month.
Parexel, which has 19,600 employees worldwide, is a contract research organization, or CRO, that helps pharmaceutical and biotechnology companies conduct clinical trials and analyze the results. Parexel boosted its already considerable presence in the Triangle in 2015 when it offered jobs to about 400 workers who were laid off by pharmaceutical company GlaxoSmithKline.
Two years ago Parexel had 1,100 employees in North Carolina, mostly at its offices in the Triangle as well as employees who work from home. An updated headcount wasn’t immediately available.
The deal appears to be good news for the CRO industry. The initial assessment from analysts was that the all-cash transaction represents a good deal for shareholders of Parexel. The CRO industry is seen as attractive because drug companies increasingly are outsourcing their clinical trial efforts.
Parexel has been struggling and last month expanded its restructuring plan to include the elimination of nearly 1,200 jobs. An activist investment firm, Starboard Value, has been urging the company to seek possible buyers and improve its performance. Starboard contended the company’s shares had been undervalued.
The sale price is high enough that it’s doubtful that a better bid will emerge, Jefferies & Co. analyst David Windley wrote in a research note.
The Triangle is home to more CRO companies, and has more CRO employees, than anyplace in the world. That includes three large publicly traded CROs that are headquartered here: No. 1 QuintilesIMS, which has dual headquarters in Durham and Connecticut, INC Research and PRA Health Sciences. In addition, other major CROs such as Parexel and PPD, which is headquartered in Wilmington, rank among the region’s largest employers, and there are also a number of smaller CROs based here.
Ross Mulken, an analyst with Evercore ISI, noted in a research note that the Parexel deals follows “hot on the heels of other recent CRO transactions,” Bloomberg News reported. “Private equity makes sense as the winner of this process given its ability to reshape the business outside the spotlight of quarterly earnings.”
Last month INC agreed to acquire a larger rival, Boston-based inVentiv Health, a deal valued at $4.6 billion that will put the combined company neck-and-neck with PPD for the title of second-largest CRO in the world. And in October QuintilesIMS was formed from the merger of Durham-based Quintiles and IMS Health of Danbury, Conn.
“Parexel is the latest example of what appears to be a trend of increased consolidation in the pharma outsourcing space,” William Blair & Co. analyst John Kreger wrote in a research note. “We would not be surprised to see further deals in the coming months (given) what appears to be a growing interest in gaining further scale to better serve large and small biopharma clients across multiple functional areas.”
The Parexel deal is expected to close in the fourth quarter.