Private equity firm TPG and the Canada Pension Plan struck on Thursday the biggest leveraged buyout deal of this year, worth $4 billion, to buy prescription drug sales data provider IMS Health Inc. The deal shows how much the financing markets and general optimism have improved. Private equity firms were shut off from striking traditional LBOs after the credit crisis limited access to cheap debt, but in the past few months, deal flow has been picking up again.
Excluding debt, the $22-a-share cash deal is the biggest leveraged buyout since Bristol-Myers Squibb Co sold its ConvaTec unit to Avista Capital and Nordic Capital in August 2008 for $4.1 billion, according to data from Thomson Reuters.
The deal has fully committed financing, consisting of equity to be invested by TPG and the Canada Pension Plan, and debt financing from Goldman Sachs Group Inc. TPG is the bigger investor of the pair, said Mark Wiseman, senior vice president of private investments at Canada Pension Plan Investment Board. “We have a very longstanding relationship with TPG, so we were working with them on this opportunity from the outset,” Wiseman said. Shares of IMS, which last month confirmed it was exploring strategic alternatives, soared 23.3 percent to close at $20.73 on the New York Stock Exchange. The deal represents a 31 percent premium on the share price on Wednesday, and a 50 percent premium on the closing share price on Oct. 16, the day before IMS said it was considering its strategic alternatives.
IMS attracted interest from a number of rival private equity firms including Silver Lake and BC Partners, which submitted a joint bid, a source previously told Reuters. Nielsen Co, the market research firm formerly known as VNU NV, had tried to buy IMS in 2005, but walked away from the deal amid pressure from shareholders.
It had been expected that the company would not be sold to a healthcare firm, sources previously said. IMS provides sensitive market data to many competing health care companies, so IMS feared it would lose customers if it aligned with one corporate buyer, sources said.”This is a strong defensive business with recurring cash flows, longstanding customer relationships, and it’s an industry leader,” said Wiseman. “For us to have an opportunity to invest a substantial sum into this kind of business, we think is very attractive in our portfolio.” Wiseman said that the deal was “capitalized reasonably conservatively, taking into account the low volatility of the company cash flow”.
The deal follows a spate of deals in the wider healthcare and pharmaceuticals industry, such as Wyeth’s $68 billion union with Pfizer Inc. IMS was advised by Deutsche Bank while the private equity buyers were advised by Goldman, Sachs & Co., Bank of America Corp’s BofA Merrill Lynch, Barclays Plc’s Barclays Capital, Evercore Partners, and JPMorgan Chase & Co. Lazard provided a fairness opinion on the deal. Law firm Ropes & Gray advised the private equity firms while Sullivan & Cromwell advised IMS.
Leave Your Comment
9 years ago
Private equity firm Blackstone Group LP posted a forecast-beating quarterly...
8 years ago
The Canada Pension Plan Investment Board (CPPIB), one of the Canada’s...
6 years ago
Blackstone Group LP will conclude fundraising for its latest buyout fund in...