INC Research Holdings and inVentiv Health announced their Boards of Directors have approved a definitive merger agreement pursuant to which their businesses would combine in an all-stock transaction, creating a leading global biopharmaceutical solutions organization. Based upon the closing price of INC Research common stock on Tuesday, May 9, 2017, the transaction values inVentiv at an enterprise value of approximately $4.6 billion, and the combined company at an enterprise value of approximately $7.4 billion.
Upon closing of the transaction, INC Research shareholders are expected to own approximately 53 percent and inVentiv shareholders are expected to own approximately 47 percent of the combined company on a fully diluted basis. Advent International and Thomas H. Lee Partners, two preeminent private equity firms, are currently equal equity owners of inVentiv and will remain investors in the combined company upon closing of the merger.
Upon completion of the transaction the combined company will leverage commercial insights to inform the clinical trial process, designing studies to be more efficient and effective to address evolving patient and payer needs. Commercial solutions informing accelerated clinical trial design include market access, data-driven Real World Evidence, advocacy relations and medical affairs. The new organization’s combined clinical scale, therapeutic depth and expertise will allow it to partner with biopharmaceutical companies to navigate an increasingly complex biopharmaceutical development and commercialization environment.
“Today marks a significant milestone for INC Research. Customers are increasingly seeking simultaneous approvals and product launches in multiple markets worldwide,” Alistair Macdonald, Chief Executive Officer of INC Research, said. “Through this strategic combination we are bringing together two of the most innovative and respected players in the field to create a leading global biopharma solutions organization with a full suite of clinical and commercial solutions to address the needs of biopharmaceutical companies, patients, physicians and payers. The combination of INC Research and inVentiv will expand our global scale and add capabilities to grow our addressable market.”
The merger offers customers a suite of outsourced services across the drug development and commercialization continuum: INC Research’s strong therapeutic focus and proven Trusted Process, combined with inVentiv’s differentiated CRO/functional service provider and CCO capabilities, including selling solutions, communications, consulting and medication adherence, delivers a leading portfolio of services designed to address the evolving challenges of the biopharmaceutical industry.
Both inVentiv and INC Research have therapeutic expertise in core areas, including oncology and central nervous system, which together represent a combined 2016 net revenue of over $1.2 billion. The merger will deepen the combined company’s therapeutic experience in these complex disease areas and enhance expertise in areas such as cardiovascular, metabolic and respiratory diseases. Having therapeutic breadth and depth is an increasingly important factor in customers’ outsourcing selection decisions.
The transaction is estimated to achieve approximately $100 million in annual run-rate cost synergies, which the companies expect will be fully realized within three years.
The companies can cross-sell their complementary services to their respective clients. INC Research’s small to mid-sized biopharmaceutical clients will now be able to access inVentiv’s comprehensive commercialization services, including selling solutions, communications, consulting and medication adherence. This capitalizes on the growing trend for small to mid-sized companies to bring their own products to market. INC Research and inVentiv will be able to cross-sell their complementary clinical capabilities, including enhanced therapeutic expertise and service delivery models (full service, hybrid, and FSP).
The transaction is projected to be accretive to INC Research’s adjusted earnings per share in the first 12 months following close, mid to high single-digit accretive in 2018 and accretive by more than 20 percent in 2019 and beyond.
With over $600 million of pro forma EBITDA for the Trailing Twelve Months ended March 31, 2017, and the expectation of approximately $100 million in annual run-rate cost synergies, plus the ability to realize nearly $850 million in NOLs, net leverage is expected to be reduced from approximately four times at closing to under three times within 18 months to two years of closing.
Following the close of the transaction, Alistair Macdonald will serve as Chief Executive Officer of the combined company, with Greg Rush serving as Chief Financial Officer and Michael Bell serving as Executive Chairman. The Board of Directors of the combined company will consist of 10 directors, with five directors designated by INC Research, including Alistair Macdonald, and with five directors designated by inVentiv, including two directors designated by Advent International, two directors designated by Thomas H. Lee Partners, and Michael Bell serving as Executive Chairman of the Board. The global organization will be headquartered in Raleigh, North Carolina, with a significant presence in the Northeast corridor of the United States, and operations worldwide, including in Asia and Europe.
The companies intend to refinance certain debt in connection with the merger. Credit Suisse has provided committed financing for the transaction.
The transaction, which is expected to be completed in the second half of 2017, is subject to, among other things, approval by INC Research shareholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of other regulatory requirements and other customary closing conditions.