Genstar to acquire contract drug manufacturer PRA for second time

Mumbai: Private equity firm Genstar Capital LLC has agreed to buy contract drug manufacturing firm PRA International in a cash deal worth $790 million.

The deal values Reston- (Virginia) based PRA at $30.50 a share, which is a 13 per cent premium to its June 24 closing price and 24 per cent above PRA''s average closing price for the past three months.

If the transaction goes through, it would be the second time San Francisco-based Genstar acquired a majority stake in the drug industry contractor.

Certain terms of the deal, including a new chief executive, chief operating officer and chief financial officer, analysts said, may not hold good for a private deal.

PRA saw its second-quarter earnings fall 90 per cent to $693,000 due mainly to large restructuring charges. Its revenue, however, rose 28 per cent to $90.1 million while profit, excluding restructuring charge and other onetime items, stood at $6 million.

Gregory Spivy, a partner of PRA''s largest shareholder and activist fund ValueAct Capital Partners LP and PRA board member, voted in favor of the Genstar buyout as part of a special independent committee.

In 2004, Genstar had bought PRA at $19 a share, turning its $33 million investment into $200 million. Genstar led a private consortium in 2001 that bought PRA for $100 million.
It still holds 13 per cent of the company and is the third-largest shareholder.

Genstar also has two partners and two strategic advisers on the eight-member PRA board.

PRA is a contract manufacturing organisation, or CRO - a firm that tests drugs for biopharmaceutical companies. CROs have gained prominence recently as many drug companies look to outsource their work to third parties, even overseas.

PRA may, under provisions of the agreement, consider other offers until September 12. If it accepts a rival offer, PRA would pay Genstar a $7.9 million breakup fee.

Credit Suisse Securities LLC is financial adviser to the PRA board''s special committee while UBS is financial advisor to Genstar, and Latham & Watkins LLP its outside counsel.