Investment group will take Syneos Health private
Contract research organisation (CRO) Syneos Health has agreed to be acquired by a group of investors, in the second multibillion-dollar takeover of a pharma outsourcing business by private equity firms this week.
A consortium comprising Elliott Investment Management, Patient Square Capital, and Veritas Capital has signed a $7.1 billion deal to buy the North Carolina-based business – including outstanding debt – taking it into private ownership after nine years as a public company.
Shares in the firm rose almost 9% on the Nasdaq after news of the $43-per-share offer emerged, reaching almost $42 and raising its market capitalisation to $4.3 billion.
The news comes shortly after private equity firms Advent International and Warburg Pincus agreed a $4.25 billion daily for Baxter’s BioPharma Solutions unit, a contract development and manufacturing organisation (CDMO), and three months after speculation of a play for Syneos first started.
Syneos told investors the offer is a 24% premium on the share price before rumours of a deal emerged.
“This agreement is the culmination of a comprehensive review of opportunities available to Syneos Health, including interest from multiple parties with the assistance of independent financial and legal advisors,” said John Dineen, Syneos’ chair.
He added that the company’s board has “unanimously determined that this all-cash transaction maximises value for our shareholders and is in the best interests of the company and all stakeholders.”
The takeover is expected to close in the second half of 2023, subject to the approval of shareholders and other closing conditions, including regulatory approvals.
The offer was confirmed shortly before Syneos reported first quarter results that included a 2.4% increase in first-quarter revenues to $1.36 billion at constant currencies.
There was a small decline in its clinical business to just over $1 billion, offset by a near 8% gain for its commercial services unit to $343 million.
The company is pretty strong in providing clinical services to smaller companies, but by its own admission has been ‘underweight’ when it comes to signing larger-scale contracts with top 20 pharma companies – something it hopes to address with the help of its new backers.
The deal is the latest in a CRO sector that has started to turn to consolidation to gain the scale needed to win large contracts. Thermo Fisher bought PPD for $17.4 billion in 2021 and Icon paid $12 billion for PRA Health Sciences, both deals coming as the contract research sector was grappling with the impact of pandemic lockdowns.
In the last few months, Syneos has been restructuring its business, in an attempt to streamline its organisational structure, consolidate staff roles, and simplify processes through digital transformation that it says is “closing competitive gaps” and showcasing its abilities.
“We believe this transaction will enable Syneos […] to continue to accelerate its growth strategy, enhance customer delivery, and evolve the organisation toward a tech-enabled future,” said Dineen.
There have been some rumblings of discontent about the deal, with reports that some investors are concerned it undervalues Syneos, whose shares have been trading above $79 within the last 12 months.
Lawfirms are already starting to circle in a bid to drum up support among any shareholders that are disgruntled by the plan.