Genstar Capital to buy PRA International for $790 million

PRLog (Press Release) – Aug 10, 2007 – In a move that would take it out of public ownership, PRA International (Reston, Virginia) has entered into a definitive merger agreement to be acquired by affiliates of private equity firm Genstar Capital (San Francisco, California) for some $790 million.  The deal has been approved by PRA’s board of directors subject to a “go-shop” provision, which allows the CRO to solicit competing proposals first.

Under the terms of the agreement, PRA shareholders will receive $30.50 per share in cash.  This represents a premium of around 13% on the closing share price on July 24th – the day before the deal was announced – and of 24% on the average closing price for the previous three months.

The board decided to accept the offer in order to give a “guaranteed immediate return to investors”, according to PRA’s CEO, Terrance Bieker.  However, Morgan Stanley, which owns a 6% share, said that it was “pretty disgusted by this offer” and would vote against the deal as it believed the share price would reach $30 by the end of 2007 anyway.  The investment bank pointed to the recent upturn in the company’s performance under new management.  Mr Bieker contended that there was still a significant risk in the business and the special committee that analysed the deal had made a risk vs value assessment for shareholders, with advice from independent experts.  

Genstar, which already owns 12.8% of PRA’s shares, has had a long association with the CRO since it part-funded a management buy-out in June 2001.  Its chairman and CEO, Jean-Pierre Conte, is also a director of PRA.  Mr Bieker expects Genstar to invest in expanding PRA’s services, employee base and geographic footprint.  The private equity firm has formed two Delaware-based affiliates, GG Holdings I and GG Merger Sub I, to acquire the company.

PRA may solicit alternative offers from third parties for a 50-day period ending on September 12th 2007.  If a superior proposal emerges and results in an agreement, PRA would have to pay a $7.9 million break-up fee to Genstar.  Details of any alternative proposals will not be disclosed until the board makes such a decision.  The transaction is expected to be completed in the fourth quarter of 2007 pending shareholder approval.

The announcement came as PRA announced impressive second-quarter revenue increases, indicating a turnaround from 2006.  However, profits were hit by restructuring costs (see separate report).

Mr Bieker, formerly president and CEO of BioSource International, has led PRA since December 2006, when he was appointed a director and interim CEO.  He was named permanent CEO in May at the same time as Colin Shannon joined as president and COO.  Both Mr Shannon and PRA’s new executive vice-president and chief financial officer, Linda Baddour, previously worked for rival CRO PPD. Article submitted by Jobs4Drug Development Ltd – www.jobs4dd.com.