Funds managed by KKR & Co. LP will buy clinical research group PRA International from Genstar Capital LLC for an undisclosed amount, PRA said on Monday, underscoring growing private equity interest in the contract research industry.
Terms of the deal were not disclosed, but a person familiar with the matter said the agreed price was around $1.3 billion, as previously reported by Reuters
"Over the past several years, we have witnessed a dramatic increase in M&A within the pharma services industry, with 17 moderate-to-large deals occurring over the past four years," Sterne Agee analyst Greg Bolan said in a research note.
Clinical research service firms are either being snapped up by private equity firms willing to pay top dollar or are being taken public in offerings that attract strong investor demand in a bet that the pharmaceutical industry, for cost reasons, will continue to outsource the research needed to get drugs approved by regulators.
Genstar bought PRA in 2007 for $797 million and put it on the block earlier this year after failing to sell it in 2011.
The San Francisco-based private equity firm filed for an IPO for PRA in May, which given the strong equity markets helped make the sales process more competitive, said Mike Gerardi, managing director, healthcare investment banking, at Jefferies LLC, PRA's financial adviser.
The market is now more generous toward such companies. Last month, Bain Capital LLC and TPG Capital LP raised $947 million by taking public Quintiles Transnational Holdings, the world's largest provider of contract research services.
"I consider the IPO market as another bidder ... and a pretty robust one," Gerardi said.
PRA provides clinical trial services and other research for pharmaceutical companies in more than 80 countries to help them win regulatory approval for drugs.
For KKR, PRA marks its second healthcare investment over the past 12 months. In June 2012, the private equity firm announced an investment in GenesisCare, an Australia-wide network of cancer and cardiovascular care centers. Since 1995, KKR has invested more than $9 billion in healthcare globally.
Latham & Watkins was legal adviser To PRA. Credit Suisse, UBS Investment Bank and Wells Fargo were financial advisers to KKR, while Simpson Thacher & Bartlett LLP was legal adviser.
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