Sunday, February 5, 2017

Carlyle, Hellman to CRO over PPD Sale?

Reuters reported:

Laboratory Corporation of America Holdings (LabCorp) is in talks to acquire contract researcher Pharmaceutical Product Development LLC (PPD) for more than $8 billion, including debt, people familiar with the matter said on Friday.
Based in Wilmington, North Carolina, PPD offers its services to biotech, pharmaceutical and medical device companies that want to outsource research services. It focuses its research on a wide range of therapeutic areas, ranging from cardiovascular to urology.

The Carlyle Group and Hellman & Friedman took the company private in 2011 for $3.9 billion.
Since then Carlyle launched $4 billion in debt that included a $400 million dividend.  PPD had no debt when Carlyle and company bought the company in 2011.  Moody's assessed after the 2015 PEU dividend recap.

PPD's B2 CFR rating reflects the company's very high financial leverage and aggressive financial policies, including a significant amount of shareholder dividends paid since the company's leveraged buyout. The proposed dividend will increase adjusted debt/EBITDA to around 7.5x for the twelve months ended March 30, 2015, up from 6.7x. The ratings also reflect risks inherent in the CRO industry, which is highly competitive, has high reliance on the pharmaceutical industry, and is subject to cancellation risk. 
Carlyle was not done with its bleeding of PPD   It took on another $200 million in debt for an acquisition that surely generated deal feels. 

Moody's reported in October 2016:

The company will be increasing the size of its existing term loan by $460 million. The proceeds of the incremental term loan, along with cash on hand, will be used to fund a $525 million dividend.  The equity sponsors (Carlyle and Hellman)  will have taken out more in dividends than the original equity invested.
That does not included deal or management fees, other ways sponsors profit from affiliates.  I'll venture Carlyle and its PEU brethren have stuck PPD for $2 billion. 

It will be interesting to see if Labcorp wins and what information they provide about PPD in their SEC filings.