Months after initiating a major layoff program, pharmaceutical analyst firm IMS Health Inc. announced a $5.2 billion buyout deal by TPG Capital and Canada”™s pension plan, including the assumption of debt.
If approved by shareholders, IMS investors would receive $22 in cash for each share of IMS stock they own, a 50 percent premium over the closing share price on Oct. 16 before rumors first surfaced of a potential deal. IMS is allowed to consider better offers through the end of the year, but the deal includes hefty termination fees if either party breaks off the deal.
Based in Norwalk and with a work force numbering 7,500 people at last report, IMS collects data on industry-wide drug sales and furnishes the information for use by pharmaceutical companies as competitive benchmarks. The company was founded in 1954 as Intercontinental Marketing Services.
In the third quarter, IMS lost $9 million as revenue dropped 5 percent from a year earlier to $425 million. Three percent growth in Asia to date this year was offset by declines of 7 percent in the Americas and 15 percent in Europe, the Middle East and Africa.
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“I think the client environment still has a fair amount of uncertainty in it and they”™re still pretty heavy focused on cost; I think you see that reflected in some of the pharma earnings announcements,” said David Carlucci, CEO of IMS, in a conference call with investors last month. “The fourth quarter is typically our largest quarter and driven to some degree by ad hoc (assignments), so there is a lot of discretionary activity depending on where they are in their budgets.”
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IMS”™ results included a $106 million charge against earnings to account for severance and other costs of a restructuring program that it hopes will result in at least $80 million in annual savings by 2012. The company is cutting 850 jobs over the next year, including 170 in the United States, after having already cut nearly 1,100 positions in the preceding two years.
“Is there a lot of additional room to cut costs?” mulled Leslye Katz in response to a question. “I think we”™ve gone very aggressively with this restructuring, in terms of both headcount and leveraging investments that was made in technology in order to drive efficiency and productivity.”
TPG Capital has offices in San Francisco, Fort Worth and New York City; its portfolio companies have included Trumbull-based Oxford Health Plans Inc. TPG”™s co-investor CPP Investment Board is based in Toronto and invests on behalf of the Canada Pension Plan.
The investors were evidently not spooked by attempts in several states to limit the sharing of such pharmaceutical prescription information by physicians”™ offices, which IMS has been battling to allow.
“It is impacting our business,” Carlucci said. “The only state where we have modified our capability is in New Hampshire. We still have the open issues in Vermont ”¦ and we have not seen other states introduce legislation. All of the states ”“ I think the number was in the neighborhood of 23 ”“ that had introduced some form of legislation between the end of November last year and today ”¦ have either abandoned those efforts or not proceeded in any way.”
