May 3, 2016 / 10:25 AM / 2 years ago

Quintiles, IMS Health to merge in $9 billion deal

(Reuters) - Contract medical research provider Transnational Holdings Inc Q.N will merge with healthcare information company IMS Health Holdings Inc IMS.N in a deal worth about $9 billion.

The combined company, which will have a market value of nearly $18 billion, will offer drug and medical device makers services ranging from helping run clinical trials to tracking sales once a product has hit the market.

The deal underscores the growing importance of information technology and data analytics in medical research and comes at a time when pharmaceutical companies are cutting costs by increasingly outsourcing drug development.

While Quintiles is one of the world’s largest contract research provider, IMS Health provides market and sales research services to the healthcare industry.

The combined company - Quintiles IMS Holdings Inc - will be led by IMS Health Chief Executive Ari Bousbib. Quintiles CEO Tom Pike will become the vice chairman.

After the deal, IMS Health shareholders will own about 51.4 percent of the new entity, while Quintiles shareholders will own the rest.

Bousbib said it had become hard to identify patients for trial enrollment and create study design as companies develop treatments for complex and rare diseases.

“By having data at our fingertips ... we can significantly improve that process and really change the game,” Bousbib said on a conference call with analysts.

Quintiles will offer 0.384 of its shares, valuing each IMS Health share at $26.53, based on Quintiles’ Monday close. Quintiles’ shares were down 8.2 percent at $63.41, while IMS Health’s shares fell 7.5 percent to $24.85.

The offer values the all-stock deal at about $9 billion, based on 339.3 million IMS diluted shares outstanding as of Dec. 31, according to Reuters data.

William Blair analysts said initial investor reaction was muted given that neither side was receiving a merger-related premium and that integration risks are usually higher in a merger-of-equals.

“There is an interesting strategic case to be made for putting Quintiles and IMS together, particularly for late-stage, post-approval work,” the analysts wrote in a note.

The merger expands on an existing research agreement between Quintiles and IMS related to clinical trials and “real world” research.

The deal is expected to add to the combined company’s 2017 adjusted earnings.

IMS Health was advised by Goldman Sachs. Its legal adviser was Weil, Gotshal & Manges.

Quintiles’ financial adviser was Barclays. Its legal advisers were Bryan Cave LLP and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan.

Reporting by Natalie Grover and Ankur Banerjee in Bengaluru; Additional reporting by Siddharth Cavale; Editing by Saumyadeb Chakrabarty

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