Saturday, December 10, 2016

Carlyle Ready to Ring Register on PPD

PPD, a pharmaceutical testing company, had no debt before The Carlyle Group and Hellman & Friedman purchased PPD in 2011.  It now has over $4 billion in debt according to Seeking Alpha.

Trying to get a piece of busy M&A activity in healthcare, PPD is hoping for a valuation of about $5B, or a deal value of more than $9B when including debt.
Carlyle and Hellman borrowed $2.1 billion to buy PPD, providing $1.8 billion in equity.  Carlyle played at least one debt for dividend trick on PPD.

We took advantage of access to cheap credit to complete over $700 million in dividend recaps from the third quarter in companies such as PPD in the United States...

Sometimes when we do a recap, we don't actually think of that as a realization
Seeking Alpha reported the size of Carlyle's potential bounty for five years of ownership:

When including dividends already paid, they could see a return of more than 3x their investment should a sale take place at $5B.
That would be $7.2 billion, meaning Carlyle's already gotten their original investment back before putting PPD on the blocks.  There's speculation Carlyle might take PPD public but private equity underwriters (PEU) prefer to keep their numbers away from public scrutiny.  An S-1 would reveal how much Carlyle, Hellman and executives made from PPD under PEU ownership. 

Update 2-5-17:  Reuters reported Labcorp is in the running to buy PPD for more than $8 billion.