Karen Bechtel, head of healthcare for Carlyle Group, spearheaded what would become an exercise in capital markets magic as the private equity firm agreed to pay $3.9 billion for contract research organization Pharmaceutical Product Development Inc. In order to afford the massive $1.76 billion in equity, Carlyle brought in buyout shop Hellman & Friedman LLC, whose point man on the deal was Allen Thorpe.
The deal -- the third-largest buyout announced this year -- was struck as volatility continued in the debt and equity markets, making buyout debt more and more expensive. "I think a lot of people thought it was just not going to work and [PPD] was going to continue as a freestanding, public company," says Garp Research and Securities Co. analyst Alastair MacKay.
When the deal was announced Oct. 3, PPD founder and executive chairman Fred Eshelman touted the price of $33.25 per share, which represented a premium of 29.6% over the stock's closing price on the previous Friday. But it was only 3.5% above the company's previous high in August, and at the lower end of the range the sellers wanted, after what were described as extremely tough negotiations over price and financing terms.
The buyout firms' advisers from Credit Suisse Group--Harold Bogle, Sarah-Marie Martin, Thomas Davidov, Stuart Smith, Michael Muntner and David Kostel -- were ultimately able to assemble $2.14 billion in leverage via commitments from Credit Suisse, J.P. Morgan Chase & Co., Goldman, Sachs & Co. and UBS.
At 7.3 times leverage, the deal has the highest debt-to-Ebitda multiple for a buyout larger than $1 billion this year, making it a breakthrough transaction for the buyout community. Market professionals say this was only possible due to the quality of PPD and the fact that there is almost no long-term debt on the company's books.
When PPD's board learned of the buyout interest, it engaged Morgan Stanley's Peter Crnkovich, Brian Silver and Tedd Smith as financial advisers, while Stephen Sands, Gerald Rosenfeld and Michael Wiggins of Lazard offered a fairness opinion.
PPD used longtime legal counsel Wyrick Robbins Yates & Ponton LLP, with the main relationship being with partner Don Reynolds, who had help from partner Jim Cobb, and associates Amy Davis and Rishi Kotiya. In August, for backup and foreign antitrust matters, PPD added a team from Skadden, Arps, Slate, Meagher & Flom LLP including Ann Beth Stebbins, Edward Welch and Frederic Depoortere. -- Max Frumes
AmerisourceBergen Corp. tapped Citigroup Inc. and Cravath, Swaine & Moore LLP to advise on its largest acquisition yet. And if the drug distribution and services company adheres to its plan to do more deals, the advisers could see further mandates.
Valley Forge, Pa.-based AmerisourceBergen turned to Citi's Ray Cooper and Barry Blake for advice on its $250 million purchase of CVS Caremark Corp.'s pharmaceutical consulting subsidiary TheraCom LLC, announced Sept. 27. Cooper and Blake have a history with AmerisourceBergen dating back to their days at Lehman Brothers Inc., which had a financing relationship with the company. While at Lehman, Blake also worked across the table from AmerisourceBergen, advising Kindred Healthcare Inc. on the 2006 stock-for-stock merger of its institutional pharma business with Amerisource's PharMerica Long-Term Care wholly owned subsidiary into a new, publicly traded company.
Cravath's Damien Zoubek, Matthew Morreale, Peter Barbur, Lauren Angelilli and Jennifer Conway provided AmerisourceBergen legal counsel. Zoubek says the TheraCom acquisition is the first deal he has worked on for AmerisourceBergen, noting that the company "had not done big M&A in a while and was open to new advisers."
The acquisition, which is expected to close by year's end, followed two other AmerisourceBergen deals completed last month. On Sept. 2, the company acquired San Mateo, Calif.-based privately held biotech manufacturing consulting firm Premier Source for an undisclosed sum. And four days later, it closed a $35 million purchase of Burlington, Mass., oncology data and analysis provider IntrinsiQ LLC.
The trio of acquisitions fits into CEO Steven Collis' plans to deploy the company's surplus cash reserves for dealmaking. And bigger deals could be on the horizon. About a month after replacing retired chief executive David Yost in July, Collis said during an earnings call that Amerisource has typically been "very comfortable [buying assets] in the $200 to $300 million range," but would consider something larger if it made strategic sense. Amerisource's last acquisition near that range was of pharmaceutical distributor Bellco Health Corp. in late 2007 for $190 million.
Woonsocket, R.I.-based CVS Caremark tapped longtime advisers Peter Hunt and Scott Kremeier of San Francisco's JMP Securities LLC for the sale. JMP has worked on no announced transactions for CVS but has a "strategic advisory relationship" with the company, says Hunt.
Davis Polk & Wardwell LLP's Louis Goldberg, Michael Mollerus and Edmond FitzGerald counseled CVS Caremark on the TheraCom sale. Davis Polk had worked alongside Dewey & LeBoeuf LLP to represent CVS on its $26 billion acquisition of Caremark Rx Inc. in 2006. It also teamed with Weil, Gotshal & Manges LLP and Richards, Layton & Finger PA to counsel CVS on its $2.9 billion acquisition of Longs Drug Stores Corp. in late 2008.