This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

PPDI Inks $3.9 Billion PE Buyout (Update 1)

PPDI story updated with analyst comment beginning in 7th paragraph.

NEW YORK ( TheStreet) -- Pharmaceutical Product Development (PPDI) has been purchased for $33.25 a share by private-equity firms Carlyle Group and Hellman & Friedman, valuing the company at $3.9 billion and making it the third largest U.S. private-equity deal this year.

The purchase price is nearly a 30% premium to PPD's last closing price and just above its 2011 high of $33.07 a share. The deal becomes the biggest buyout since mid-July, showing that the buyout market may be reviving with falling company valuations. According to Dealogic data released for the third quarter, private equity buyouts fell 40% in the third quarter to $33.1 billion, but are still on track for a nearly 30% yearly gain compared with 2010.

Shares rose more than 25% to $32.28 in afternoon trading.

Carlyle and Hellman & Friedman will buy the Wilmington, North Carolina- based contractor for pharmaceutical industry drug research and development in an all-cash transaction that has been approved by its board and needs shareholders' approval before completion.

According to a press release announcing the deal, the company expects the sale to be completed in the fourth quarter of 2011 at which point, the company will go private after being publicly held since 1996. Because of the sale, the company is not expecting to host a conference call to discuss its third-quarter results.

"The sale of PPD to The Carlyle Group and Hellman & Friedman provides an attractive return for our shareholders, while also ensuring a secure foundation and commitment to investment, innovation and excellence for PPD clients and employees as the company builds on its 25-year history of success," said Fred Eshelman, chief executive of PPD, in a statement announcing the deal.

Eshelman, who founded the company in 1985 and is chairman of its board also is the company's second largest shareholder. He holds 7.4 million shares or 6.5% of the company's outstanding shares worth a total of roughly $240 million. Since the financial crisis in 2008, Eshelman has sold 466,997 of his shares or roughly 6% of his previous ownership, according to filings with the Securities and Exchanges Commission.

While shareholders mull over the private-equity bid, other interested buyers have 30 days to submit bids to PPD's board. The merger agreement gives Carlyle and Hellman & Friedman the right to match a proposal if PPD's board found a competing offer to be superior.

After rumors of a potential takeover surfaced this summer, in a research note this afternoon William Blair analyst John Kreger wrote that, "This transaction has been anticipated for three months given press reports and management's confirmation that a strategic review was under way."

In an email to TheStreet, Eric Coldwell an analyst at R.W. Baird said that he expected shareholders to approve the deal and wrote, "I would think that existing holders should be somewhere between satisfied and ecstatic - many had written this deal off as unlikely and the shares have sold off at least three times since the first speculation of a deal several months ago. The focus will be on where the stock would be now if there was no deal - likely in the lower or mid-$20s."

PPD, which reported net income of $124 million in 2010 has been profitable through the recession and saw revenue grow more than 10% in the quarter ended June 30th compared with last year. PPD has been profitable every year since its 1996 I.P.O., according to company filings.

In mid-September, the company announced it had ended its search for a new C.E.O by hiring Raymond H. Hill after a nearly 5 month search to replace David Grange, who retired in May. While the search was ongoing, Eshelman and other company managers served as interim leaders of PPD.

The company currently operates in 44 countries and has 11,000 employees worldwide. It does contract research and development for drugs in the discovery, preclinical, Phase 1, Phase II and post regulatory approval phases of development. According to its Web site, the company has an expertise in pharmaceuticals, biotechnology and medical devices along with a therapeutics division.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,033.97 -37.25 -0.22%
S&P 500 1,973.42 -4.38 -0.22%
NASDAQ 4,498.7120 -7.14 -0.16%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs