- Contract research provider Icon on Wednesday said it will buy PRA Health Sciences for about $12 billion in cash and stock, snapping up one of the larger independent companies in the drugmaker services business.
- Per deal terms, PRA shareholders will receive $80 in cash and 0.4125 shares in Icon for each PRA share they own. The deal represents a premium of about 30% over PRA's closing price yesterday of $127.73. Shares in Icon slid by more than 8% in morning trading Wednesday following the deal's announcement.
- Icon CEO Steve Cutler and CFO Brendan Brennan will keep their roles at the combined company, which will be based in Dublin, Ireland, the company said in a statement. PRA Chairman and CEO Colin Shannon will join the board.
Pharmaceutical and biotech companies are increasingly turning to contract research organizations, or CROs, as clinical development and data demands become more complex, fueling consolidation in the sector.
Combined, Icon and PRA will hold top market positions in "key clinical market segments" and start out with partnerships with a majority of the top 20 biopharmaceutical companies, Icon said. That scale will be critical after a raft of mergers in the CRO industry over recent years.
The combined company will compete with the likes of Syneos Health, which emerged from the union of INC Research and InVentiv Health. When the companies announced their all-stock merger in 2017, they were positioned to form one of the top three CROs.
The recent merger spree was already well underway by then, after LabCorp bought Covance for about $6 billion in 2015. The next year, IMS Health and Quintiles merged in a $9 billion deal. Since then, Thermo Fisher has added Patheon N.V. for $7.2 billion and Brammer Bio for $1.7 billion to expand in the contract research and development business and in gene therapy, respectively.
Icon said PRA's mobile health platforms and data expertise will provide added benefits for customers and fit well with its own Accellacare network, home health services and interest in wearables. After the cash and share exchange, PRA shareholders will own about 34% of the combined company, Icon said.
The company expects annual growth of at least 20% starting in the second full year of the merger, helped by a lower combined tax rate of 14% and cost savings of about $150 million a year. Icon expects the deal to close in the third quarter.
Icon currently employs about 16,000 people around the world, while PRA has about 19,000 employees. Icon also reported earnings today, saying it brought in revenue of $2.8 billion last year. The company expects that figure to jump as much as 18% this year.