Laboratories are big business, and they’re trading for very strong multiples these days. This year in particular, we’ve seen a lot of global M&A action around contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs). The most recent announcement was the all-stock merger of equals between Quintiles (NYSE: Q) and IMS Health Holdings (NYSE: IMS).
First, the details. IMS Health shareholders will receive a fixed exchange ratio of 0.384 shares of Quintiles common stock for each share of IMS Health common stock. Upon completion, IMS shareholders will own approximately 51.4% of the shares of the combined company on a fully diluted basis and Quintiles shareholders will own approximately 48.6% of the combined company on the same terms. The combined company, Quintiles IMS, expects to achieve annual run-rate cost savings of $100 million by the end of year three and the transaction will be accretive to adjusted diluted EPS in 2017.
Based on the closing of IMS and Quintiles common stock prices on May 2, 2016, the price works out to $12.885 billion, which includes assumed long-term debt of $4.14 billion. That gives a 4.4x price/revenue multiple, and 14.5x EBITDA.
The interesting part is how a global information and technology company like IMS fits with a biopharma that is the world’s largest provider of product development and integrated healthcare services. The companies expect the combination will improve clinical trial design, recruitment and execution in the $100 billion biopharma product development market by combining IMS Health’s global information solutions with Quintiles’ industry leading product development skills. We’ll take a look at this deal and other recent announcements on the HealthCareMandA.com member site. Watch for it.
