Genstar to acquire contract drug manufacturer PRA for second time
28 Jul 2007
Mumbai:
Private equity firm Genstar Capital LLC has agreed
to buy contract drug manufacturing firm PRA International
in a cash deal worth $790 million.
The deal values Reston- (Virginia) based PRA at $30.50
a share, which is a 13 per cent premium to its June 24
closing price and 24 per cent above PRA''s average closing
price for the past three months.
If the transaction goes through, it would be the second
time San Francisco-based Genstar acquired a majority stake
in the drug industry contractor.
Certain terms of the deal, including a new chief executive,
chief operating officer and chief financial officer, analysts
said, may not hold good for a private deal.
PRA
saw its second-quarter earnings fall 90 per cent to $693,000
due mainly to large restructuring charges. Its revenue,
however, rose 28 per cent to $90.1 million while profit,
excluding restructuring charge and other onetime items,
stood at $6 million.
Gregory Spivy, a partner of PRA''s largest shareholder
and activist fund ValueAct Capital Partners LP and PRA
board member, voted in favor of the Genstar buyout as
part of a special independent committee.
In 2004, Genstar had bought PRA at $19 a share, turning
its $33 million investment into $200 million. Genstar
led a private consortium in 2001 that bought PRA for $100
million.
It still holds 13 per cent of the company and is the third-largest
shareholder.
Genstar also has two partners and two strategic advisers
on the eight-member PRA board.
PRA is a contract manufacturing organisation, or CRO -
a firm that tests drugs for biopharmaceutical companies.
CROs have gained prominence recently as many drug companies
look to outsource their work to third parties, even overseas.
PRA
may, under provisions of the agreement, consider other
offers until September 12. If it accepts a rival offer,
PRA would pay Genstar a $7.9 million breakup fee.
Credit Suisse Securities LLC is financial adviser to the
PRA board''s special committee while UBS is financial advisor
to Genstar, and Latham & Watkins LLP its outside counsel.
