The Deal: Bain, TPG Get Windfall With Quintiles IPO

NEW YORK ( TheDeal) -- Quintiles Transnational Holdings ( Q) raised about $947 million for its private-equity backers including Bain Capital Partners and TPG Group as research services company held its public offering at $40, and then proceeded to rise.

Shares were little changed Friday at $42.07 after gaining 5.3% on Thursday, the company's debut on the New York Stock Exchange. The offering valued the Durham, N.C.-based provider of contract research services for the biotech and pharmaceutical markets at $5.2 billion.

Together with Bain and TPG Capital, London-based 3i Group plc and Singapore state-owned asset manager Temasek Holdings Pte. Ltd. sold 10.6 million of the shares in the IPO while Quintiles sold 13.1 million shares. Underwriters have an option to purchase an additional 3.5 million shares.

"The offering was very well received," Quintiles spokesman Phil Bridges said Thursday. "We don't expect any major changes in the management of the company, ownership or strategic direction."

The company said in regulatory filings that it realized about $525 million in proceeds after expenses.

Quintiles said it would use proceeds from the offering to pay down credit facilities and other loans. It intends to use about $306 million to pay all amounts outstanding under a $300 million term loan, $50 million of the net proceeds to repay indebtedness under about $2 billion in senior secured credit facilities and around $25 million for management severance packages and general corporate purposes, including strategic growth opportunities.

"Going public is really a change in our capital structure. It provides return on investment for our shareholders and debt retirement," Bridges said.

At $40 per share, the company's PE owners raised a total of $269.4 million, without including the underwriters' option. Only TPG is selling shares to the underwriters. If the option is exercised, TPG would sell an additional 1.4 million shares, bringing total proceeds to $270.8 million.

As a result of the offering, Bain's stake in Quintiles was cut to 18.6% from 22.9% and 3i's dropped to 12.3% from 15.1%. TPG's stake was cut to 18.6% from 22.9%, but if the underwriters' option is exercised, its stake will drop further to 17.5%.

The firms' remaining stake in Quintiles is valued at $2.5 billion, without considering the underwriters' option. With the option, the value of the firms' collective stake is about $2 billion.

Between 2009 and 2012, Quintiles paid its shareholders roughly $1.5 billion in dividends, the most recent being one of $241.7 million paid out in October.

The private equity firms acquired the company in a $3 billion-plus deal in 2008.

Quintiles generated $4.8 billion of revenue in 2012, 12% higher than in the previous year, and conducted business in about 100 countries, filings show. Net income last year fell 27% to $176.6 million.

Morgan Stanley, Barclays plc and JPMorgan Securities LLC are serving as joint lead bookrunning managers for the offering. Citigroup Inc., Goldman, Sachs & Co., Wells Fargo Securities LLC, Bank of America Merrill Lynch and Deutsche Bank Securities Inc. are bookrunning managers. Robert W. Baird & Co., William Blair & Co. LLC and Jefferies & Co. are serving as lead co-managers, with Guggenheim Securities LLC, Piper Jaffray Cos., Raymond James & Associates Inc., RBC Capital Markets LLC. and UBS serving as co-managers.

Gerald Roach and Amy Batten at Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP are counsel to the issuers.

Colin Diamond at White & Case LLP is lead counsel for the underwriters.

Written by Thomas Zadvydas in New York