Carlyle, GTCR bet on Albany Molecular, further validating CRO market

Another pair of bulge-bracket sponsors are injecting capital into clinical-trial services, underscoring interest in a segment that has seen a strong flow of dealmaking in recent years.

Carlyle Group and GTCR teamed up to acquire Albany Molecular Research, a global contract research and management company serving the pharma and biotech industries. The investors agreed to take the Albany, New York, company private for about $21.75 a share, or $922 million.

Albany Molecular must pay a $35 million breakup fee should it call off the deal, while Carlyle and GTCR will pay $70 million if they back out, an SEC filing shows.

The transaction comes on the heels of INC Research Holdings’ May agreement to merge with private-equity-owned inVentiv Health, a deal that at the time assigned the latter an enterprise value of about $4.6 billion. InVentiv’s backers, Thomas H. Lee and Advent International, plan to remain holders in the combined contract-research organization once the deal closes.

Just weeks earlier, in April another CRO, Pharmaceutical Product Development, announced a recap by existing investors Carlyle and Hellman & Friedman, along with new investors — Abu Dhabi Investment Authority and GIC, Singapore’s sovereign-wealth fund. The recap assigned PPD a $9.05 billion enterprise value.

Credit Suisse Securities served as sell-side financial adviser for both the Albany and inVentiv transactions.

Besides the two pending large-scale deals, another CRO on the auction block is the U.K.’s Chiltern International, which Reuters first reported in April had tapped Jefferies to explore a sale that could produce a roughly $1.3 billion valuation.

The Chiltern process is in its second round with some six to eight parties in the mix, one source familiar with the matter told Buyouts this week. The auction could result in a sale to either PE or a strategic, but the former is more likely, this source and a second speculated.

The CRO universe has seen both small- and large-scale consolidation, with Chiltern among those to gain scale through its own purchases. The British clinical-services company scooped up Theorem Clinical Research, a midsized CRO focused on Phase 2 and 3 clinical trials, in September. Terms weren’t disclosed, but the transaction was valued at about$270 million, two sources familiar with the matter said at the time.

Other midsize-deal activity soon followed. Metalmark Capital Holdings in October surfaced as the victorious bidder for Indigo Capital’s Premier Research Group, concluding a William Blair auction that drew both financial and strategic interest. Terms weren’t disclosed, but Premier at the time posted about $23 million in EBITDA, two sources said then.

William Blair also conducted the auction for Pharm-Olam International, a CRO of size and scope similar to Premier that ultimately selected Quad-C Management in February as its buyer.

In connection with the Albany Molecular transaction, Carlyle is investing out of its $13 billion Carlyle Partners VI LP fund, while GTCR’s equity investment will come from GTCR Fund XI, a buyout fund with $3.85 billion of limited-partner-capital commitments.

The deal will be financed with debt and equity.

Albany, founded in 1991, provides drug-discovery and drug-development services, manufacturing facilities serving Phase 1 development through commercial API, comprehensive sterile dosage-form development, as well as project-management services.

The agreement has been approved by the Albany Molecular board. It remains subject to closing conditions, including shareholder and Hart-Scott-Rodino antitrust approvals.

Action Item: Carlyle’s current portfolio:

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