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Parexel sold to investment firm in $5B deal

June 20, 2017

Pamplona Capital Management, a private equity firm, is buying contract research organization (CRO) Parexel International (PRXL) for a deal valued at about $5 billion.

The deal involves Pamplona acquiring all outstanding shares of Parexel for $88.10 per share in cash. This is a 27.9 percent premium to Parexel’s stock price on May 5, 2017, which was the last trading day before rumors of a sale affected share price.

The Wall Street Journal reported in early May that Parexel was up for sale. At that time, the company’s market cap was about $3.8 billion.

Parexel has three segments, Clinical Research Services, Parexel Consulting and Medical Marketing, and Perceptive. The Clinical Research Services unit provides clinical trials management and biostatistics, data management, and clinical pharmacology in addition to related medical advisory and investigator site services. The services are conducted in cardiology, oncology, infectious diseases, neurology, allergy/immunology, endocrinology/metabolism, gastroenterology, obstetrics/gynecology, orthopedics, pediatrics, psychiatry, and transplantation.

The Consulting and Medical Marketing segment provides drug development, regulatory, manufacturing compliance, business process consulting, staffing solutions, and marketing expertise. Perceptive offers a portfolio of products and services including medical imaging services, interactive voice response systems, clinical trials management systems, Web-based portals, systems integration, and patient diary applications.

“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,” said Josef von Rickenbach, founder, chairman and chief executive officer of Parexel, in a statement. “Having considered these opportunities, the Parexel board of directors unanimously determined that this all-cash transaction and the significant, certain value it provides is in the best interest of Parexel shareholders, as well as our company.”

The deal is expected to close early in this year’s fourth quarter. It is not subject to a financing condition. Bank of America Merrill Lynch and JP Morgan Chase Bank are providing financing.

The Parexel board of directors unanimously approved the deal. A Special Meeting of Shareholders will be held to discuss and vote on the proposed agreement as soon as practicable.

Once the deal is complete, Parexel will become a privately held company. Shares of the company’s common stock will no longer be listed on any public market.

Pamplona Capital Management is based in London, New York, and Boston. Established in 2005, it provides an alternative investment platform across private equity, hedge funds, and single-manager hedge fund investment. It manages over $10 billion in assets across various funds.

“We have great respect for the global leadership that Josef and the talented employees at Parexel have built,” said Jeremy Gelber, a Pamplona partner, in a statement. “We are excited to partner with a company and a team that have a strong track record in helping to successfully navigate the complexities innate to the biopharmaceutical industry and bring new therapies to market.”

In May, only a day after the original story broke about a possible sale, Parexel announced an extension of its restructuring plans. Part of that plan called for 1,100 to 1,200 job cuts worldwide. These were in response to revenue shortfalls in the third-quarter, which ended March 31, 2017. In a statement at the time, Richenbach said, “In response to revenue shortfalls earlier in this fiscal year, we are right-sizing the organization. In January, we announced a restructuring program, and we are now expanding that program. All in, we expect total annual savings of $75-$85 million from our restructuring activities in Fiscal Year 2018. We remain committed to our longer-term goal of 14-16 percent adjusted operating margin.”

The company employs approximately 20,000 people worldwide. About half are employed in Massachusetts.


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