PPD acquired by Thermo Fisher Scientific: fairness opinion by J.P. Morgan
Announced April 15, 2021 · One-step merger · All cash ·
DEFM14C filed May 25, 2021
Enterprise value
$20B
EV / LTM EBITDA
20.3x
EBITDA $1.0B · 19% margin
EV / LTM revenue
3.83x
revenue $5.3B
DCF discount rate
7.5%–8.5%
Deal terms
ConsiderationAll cash
Price per share—
Premium—
Premium basis—
StructureOne-step merger
Termination fee$520M (3.0% of equity)
Reverse termination fee—
Go-shopNone
Outside date—
FilingDEFM14C · EDGAR index
Opinion of J.P. Morgan to the target board
Delivered April 14, 2021
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Public trading multiples / selected companies analysis | J.P. Morgan compared the financial and operating performance of the Company with publicly available information concerning certain other companies it deemed relevant and reviewed current and historical market prices of Company Common Stock and such other companies' securities. Specific companies and multiples not included in the provided excerpt. | — |
| Selected transaction analysis | J.P. Morgan compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies it deemed relevant and the consideration paid for such companies. Specific transactions and multiples not included in the provided excerpt. | — |
J.P. Morgan retained as the Company's financial advisor pursuant to an engagement letter; fee amounts not disclosed in the sections provided.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $5.9B | $6.5B | $7.1B | $7.8B | 9.7% |
| Revenue growth | 12.0% | 9.1% | 10.0% | 10.0% | |
| EBITDA | $1.1B | $1.3B | $1.4B | $1.6B | 11.0% |
| EBITDA growth | 13.4% | 10.7% | 11.2% | 11.1% | |
| EBITDA margin | 19% | 19% | 20% | 20% | |
| Implied EV / EBITDA | 17.9x | 16.2x | 14.6x | 13.1x |
Year-1 growth is against LTM at announcement ($5.3B revenue, $1.0B EBITDA); later years are year over year.
PPD does not ordinarily prepare five-year forecasts, but in connection with the Merger management developed certain forward-looking financial cases covering fiscal years 2021 through 2025, which were reviewed by the Board and provided to J.P. Morgan. The filing excerpt describes the cases qualitatively and cautions they were not prepared for public disclosure or under GAAP; no specific revenue or EBITDA figures appear in the provided section.
Process notes
Information statement (DEFM14C) rather than a proxy: the transaction was approved by written consent of the Majority Stockholders delivered on April 15, 2021, which extinguished the Company's fiduciary-out/superior-proposal and termination rights. Termination fee of $520,354,225 was negotiated as 3% of equity value (Thermo Fisher initially sought 4%, the Company proposed 2%). J.P. Morgan delivered an oral opinion to the Board on April 14, 2021, confirmed in writing the same date; it was the sole fairness opinion. Regulatory covenant included divestitures up to 10% of 2020 consolidated revenues plus supply commitments. The sliced opinion section omits the detailed valuation analyses, so per-share ranges and advisory fees are not available.
Other Pharmaceutical Services fairness opinions
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- Syneos Health / Elliott Investment Management / Patient Square Capital / Veritas Capital 2023 · 9.7x EV/EBITDA
- Cambrex / Permira Funds 2019 · 14.5x EV/EBITDA
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- Societal CDMO / CoreRx 2024 · 11.4x EV/EBITDA
- Catalent / Novo Holdings / Novo Nordisk 2024 · 22.9x EV/EBITDA
All Pharmaceutical Services opinions → · J.P. Morgan opinions