Clarivate Analytics plc (NYSE: CCC; CCC.WS), a global leader in providing trusted insights and analytics to accelerate the pace of innovation, has signed a definitive agreement to acquire Decision Resources Group ("DRG"), a premier provider of high-value data, analytics and insights products and services to the healthcare industry, from Piramal Enterprises Limited ("PEL", NSE: PEL, BSE: 500302), part of global business conglomerate Piramal Group. The $950 million purchase price-approximately 12x trailing DRG Adjusted EBITDA, taking into account acquisition cost synergies but not revenue synergies-includes $900 million in cash and approximately $50 million in Clarivate ordinary shares to be issued following the one-year anniversary of closing. The acquisition is expected to be accretive to Clarivate earnings in 2020.
DRG specializes in enabling the world's leading pharma, biotech and medical technology companies to achieve commercial success in complex health markets with the creation of effective patient-centric commercial strategies. Together, DRG and Clarivate will be well-positioned in the $19 billion Life Sciences analytics market, which currently is enjoying double-digit growth, to support customers across the entire drug, device and medical technology lifecycle from research to outcome. The combined business will offer a one-stop shop for Life Sciences customers, helping them to improve the commercialization of life-changing therapies.
Jerre Stead, Executive Chairman and CEO, Clarivate Analytics: "This is a milestone acquisition which doubles the size of our Life Sciences business, is accretive to our 2020 earnings, and sets us up to become an essential, end-to-end, industry-leading data and analytics provider to the highly attractive Life Sciences ecosystem. We expect the acquisition of DRG to increase Clarivate's total company revenue by 20%, deliver approximately $77 million in annual Adjusted EBITDA before the pursuit of any revenue synergies, and drive DRG's Adjusted EBITDA margins towards Clarivate's total company target of greater than 40%.
"Both companies have a great heritage-built on talented people with deep industry subject matter and technical expertise. Together, we look forward to unlocking the tremendous potential of a unified team."
Ajay Piramal, Chairman Piramal Group: "We are pleased to have grown DRG's market leadership over the last few years and believe that through this combination, Clarivate, with its size and scale, is well positioned to further accelerate DRG's growth potential. This transaction demonstrates our continued commitment to create sustained long-term value for all stakeholders.
"Along with the ongoing equity capital raise in PEL, this transaction not only further strengthens the company's balance sheet but also marks another step towards significantly unlocking value in future."
Mukhtar Ahmed, President, Science Group, Clarivate Analytics: "The addition of DRG's services and solutions to our portfolio supports our focus on creating exceptional customer value through delivering highly specialized analytics and expert insights and a wider range of Life Sciences solutions that help solve our customers' most difficult challenges when discovering, developing and commercializing new drugs, medical devices and technologies. The acquisition also means that by combining expertise, data and technologies, Clarivate will be able to pursue significant growth opportunities through new product development and deeper market penetration driven by offering our customers a broader portfolio of tools and services."
Vivek Sharma, CEO, DRG: "I am excited for this acquisition as it creates an even more powerful platform for DRG's AI and analytics-enabled solutions to support our customers in their quest to improve patient health outcomes. This new and expanded platform will further empower our employees to continue their focus on customer centricity and collaborative innovation with our customers."
DRG's current CEO, Vivek Sharma, will depart the company following the completion of the transaction, when the business will join the Science Group at Clarivate Analytics, under the stewardship of Mukhtar Ahmed, President-Science Group. This Product Group includes both the Cortellis™ suite of Life Science intelligence solutions and Web of Science, the world's largest publisher-neutral citation index and research intelligence platform.
Numerous Strategic Benefits to Drive Future Growth
- Complementary Fit with Clarivate Life Sciences: Combining the expertise, data and technologies of DRG with Clarivate will help customers make smarter and faster evidence-based decisions to boost clinical and commercial success. Clarivate's Life Sciences products, including Cortellis, focus on innovation covering the front-end of Life Science development, encompassing pre-clinical and clinical development, regulatory review and business development, while DRG has largely focused on the delivery of essential solutions for the successful commercialization of pharmaceutical products and medical devices & technologies.
- Creates a Top Data and Analytics Provider in Life Sciences: DRG's and Clarivate's complementary solutions will better position the combined organization in a market that favors tech-enabled players with end-to-end capabilities and broad and proprietary data sets. Clarivate's enhanced Life Sciences offering will be well-positioned to support customers across the entire drug, device and medical technology lifecycles.
- Sales Opportunities to Drive Growth: Leveraging the expertise, content and technologies of both Clarivate and DRG will create significant revenue growth opportunities through new product development and support deeper market penetration, driven by offering each company's customer base the benefits of a more comprehensive suite of products.
Financially Compelling Transaction
- Accretive to Clarivate's Earnings per Share: The transaction is expected to be accretive to Clarivate's earnings per share in 2020.
- Growing Revenue and EBITDA Business with Significant Cost Savings Opportunities: In 2019, DRG generated $207 million of revenue, with 9% organic growth, and $47 million of Adjusted EBITDA before the impact of acquisition cost synergies. Clarivate expects to achieve cost synergies of approximately $30 million within the first 18 months after the transaction closes, which in addition to revenue synergies, is expected to drive DRG's Adjusted EBITDA growth and expand its Adjusted EBITDA margin towards the 40% range.
- Strong Free Cash Flow Generation and Funding Plan Supports Deleveraging: Clarivate remains committed to managing its balance sheet and its go-forward capital structure. The company plans to fund the transaction with an optimal mix of debt and equity capital proceeds.
Financing and Approvals
In connection with the transaction, Clarivate has secured a backstop of $900 million fully committed bridge facility from Citi and Goldman Sachs & Co. LLC. Clarivate expects to obtain long-term financing with proceeds from debt and equity capital markets before the closing of the transaction.
The transaction is expected to close within the first quarter of 2020, subject to the satisfaction of customary closing conditions and regulatory approvals, including approval by PEL's shareholders.
Shares of PIRAMAL ENTERPRISES LTD. was last trading in BSE at Rs.1627.05 as compared to the previous close of Rs. 1546.95. The total number of shares traded during the day was 144728 in over 8627 trades.
The stock hit an intraday high of Rs. 1655 and intraday low of 1551.55. The net turnover during the day was Rs. 233882785.