Premier Research Group has followed fellow UK-based contract research organisation (CRO) Synexus Clinical Research into the arms of private equity.
The independent directors of Premier Research Group have agreed to a takeover offer of 100 per share in cash from Pegasus Bidco, an acquisition vehicle backed by private equity firm ECI, financier Indigo and the Premier management.
The bid values the CRO at around £60.1 million (€76.3 million) and represents a premium of about 38% to the closing price of 72.25 pence per Premier share on 14 March, the last business day before the company announced it was in the final stages of agreeing an offer.
Independent directors are defined as those who, apart from their directors’ fees and shareholdings, are independent of management and free from any business or other relationships that could materially interfere with the exercise of their independent judgment.
The acquisition, which is subject to legal and shareholder approvals, is expected to be wrapped up on or around 6 June 2008. Announcing the agreed offer, Pegasus Bidco said it had received irrevocable undertakings and letters of intent to vote for the acquisition in respect of 28,970,697 Premier Research shares, around 48.2% of the existing issued share capital.
Bidco has also agreed to acquire the Premier shares held by management, which make up roughly another 7.9% of the existing issued share capital.
The deal is a further testament to growing private equity interest in contract research as a relatively stable alternative to the core pharmaceutical sector, driven by the still buoyant trend towards outsourcing.
Like Synexus, the ‘hub site’ recruitment specialist that last November agreed to a £18.1 million buyout from Lyceum Capital, Premier had seen its expansion plans thwarted in recent months by a dramatic slump in its share price, which hit a low of 34 pence last December. That was after the company announced in August that it had received a “very preliminary” bid approach from certain members of its executive management team.
As chairman Dr Peter Fellner commented, Premier Research “came to the market in 2004 with the declared aim of building a competitive, international CRO business through a buy and build strategy. However the recent difficult stock market conditions and the reduced availability of debt funding currently prevent this strategy from being effectively pursued.”
One disgruntled shareholder and blogger took a more cynical view, commenting online: “This is the classic stitch-up. The directors talk the price down to next to nothing and then wow-buy the company for a steal. I will vote against this.”
Richard Chapman, director of ECI and Bidco, noted that the “area of the CRO industry that Premier Research is in is set to continue growing significantly at an estimated 10% per annum thanks to the non-cyclical nature of demand for healthcare in general and pharmaceuticals in particular. We believe that with our support Premier Research can grow faster than the market through organic growth and by making further acquisitions”.
The CRO has shown a distinctly acquisitive bent since it joined the AIM market in December 2004. Last July it snapped up US CRO ARS for up to $22.1 million and the Swiss D-TARGET for up to SwFr17.0 million ($14.1 million), Premier’s fifth and sixth acquisitions as a publicly traded company.
Premier claims “a strong position in the international contract research industry, with a top 15 market position, over 850 staff and 30 offices in Europe and North America”. The buy and build strategy has driven revenues up from £9.3 million in the year ended 31 January 2005 to £41.8 million in the year to 31 January 2007.
Nonetheless, the board believes Premier “remains sub-scale in global terms and that it needs significantly more critical mass in order to compete on an equal footing with the other global CROs”. There is a risk of losing market share and position if the company does not continue adding to its product offering and geographical coverage, Premier warned.
