Thermo Fisher to Acquire CRO giant PPD for $17.4 Billion in Cash
Thermo Fisher Scientific expands clinical research service offering to pharma and biotech customers with a CRO giant PPD acquisition.
Thermo Fisher Scientific, a world-leading provider of scientific instrumentation, reagents, consumables, software and services, and PPD, a leading global supplier of clinical testing services to the pharma and biotech sector, reported that their boards of directors have accepted a binding deal in which PPD will be acquired by Thermo Fisher for $47.50 a share, or $17.4 billion in cash and the assumption of about $3.5 billion in net debt.
This reflects an approximate 24% premium to the unchanged trading price of PPD’s common stock on the Nasdaq (Nasdaq: PPD) as of Tuesday, April 13, 2021, or a 32% premium to the 60-day VWAP inclusive of that date.
PPD to become a part of Thermo Fisher by the end of 2021
PPD is a global Contract Research Organisation (CRO) that offers a wide array of clinical testing expertise and laboratory services to help customers succeed in drug production quality and speed up drug discovery. PPD has 26,000 workers across more than 50 countries, making it a giant in the growing $50 billion clinical testing services industry. The company generated $4.7 billion in revenue in 2020. Headquartered in Wilmington, North Carolina, US, PPD will become a part of Thermo Fisher Scientific once the transaction is completed, which is expected by the end of 2021.
Marc N. Casper, Chairman, President and Chief Executive Officer, Thermo Fisher Scientific commented:
“Pharma and Biotech is our largest and fastest growing end market, and our customers value us as a strategic partner and an industry leader. The acquisition of PPD is a natural extension for Thermo Fisher and will enable us to provide these customers with important clinical research services and partner with them in new and exciting ways as they move a scientific idea to an approved medicine quickly, reliably and cost effectively. Longer term, we plan to continue to invest in and connect the capabilities across the combined company to further help our customers accelerate innovation and drive productivity, while driving further value for our shareholders.”
“Both companies have complementary mission-driven cultures, and I can’t wait to welcome PPD’s colleagues from around the world to Thermo Fisher once the transaction is completed.
David Simmons, Chairman and Chief Executive Officer, PPD, said:
“This is a very exciting announcement for our shareholders and will provide customers with an even better opportunity to bring meaningful innovation to the market faster and more efficiently. Thermo Fisher is a world-class company with a very similar culture and values and will provide a great foundation for our colleagues to continue to deliver for our customers and to develop their own skills and careers.”
Thermo Fisher establishes position as a global leader in the clinical research services industry
The purchase establishes Thermo Fisher as one of the global leaders in the high-growth clinical research services industry.
PPD operates in a $50 billion industry, projected to expand over the foreseeable future in the mid-single digits as a result of technological innovations and an expected huge financial support for novel drug development. Furthermore, there is a need for strategic suppliers to help the pharmaceutical and biotech industries in delivering safe and effective drugs to the patients that need them.
Thermo Fisher improves value proposition to pharma and biotech consumers
PPD has made major investments in its comprehensive clinical research capabilities and is now one of the leading global competitors, delivering services to both new biotech companies and the world’s largest pharmaceutical businesses.
The aquisition further boosts Thermo Fisher’s value proposition for pharma and biotech customers by incorporating highly complementary services. Thermo Fisher is a leading provider of supporting R&D, clinical studies and manufacturing to the pharma and biotech industry. PPD enhances Thermo Fisher’s offering by bringing a recognized drug development platform, outstanding patient procurement capability, effective laboratory services, and a valuable reputation for excellent quality and services.
These identifying factors improve Thermo Fisher’s value proposition to pharma and biotech consumers facilitating their access to resources and services that are critical to their prosperity.
In the near future, Thermo Fisher’s access to key decision-makers in pharma and biotech companies will increase the opportunities for PPD to win additional work from existing and new customers as the pandemic has further highlighted the need for these customers to develop strategic relationships with their key suppliers. The merged company’s vast expertise and experience in servicing the pharmaceutical and biotech sectors would offer novel platforms for consumers, potentially reducing drug production time and expense.
Expected Financial Benefits
The transaction is expected to be immediately and significantly accretive to Thermo Fisher’s (NYSE: TMO) adjusted Earnings Per Share (EPS), adding $1.40 in the first 12 months after close. Thermo Fisher anticipates realizing total synergies of approximately $125 million by year three following close, consisting of approximately $75 million of cost synergies and approximately $50 million of adjusted operating income benefit from revenue-related synergies.
Approvals and Financing
The transaction, which is expected to be completed by the end of 2021, is subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals.
In addition to board approval, shareholders holding in aggregate approximately 60% of the issued and outstanding shares of common stock of PPD have approved the transaction by written consent. No further action by other PPD shareholders is required to approve the transaction. Thermo Fisher has obtained committed bridge financing with respect to a portion of the purchase price. To fund the transaction, Thermo Fisher intends to use proceeds from debt financing and cash on hand.
Barclays Capital, Inc. and Morgan Stanley & Co. LLC are serving as financial advisors to Thermo Fisher, and Cravath, Swaine & Moore LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel. For PPD, J.P. Morgan Securities LLC is serving as exclusive financial advisor, while Simpson, Thacher & Bartlett LLP is serving as legal counsel.
SOURCE: Thermo Fisher Scientific
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