IMS to be Acquired by Private Funds

IMS Health (RX) recently agreed to its acquisition by investment funds managed by TPG Capital (TPG) and the Canada Pension Plan Investment Board (CPPIB) for a total value of $5.2 billion.

The Board of Directors approved the decision based on the Transaction Committee recommendation, which was set up to review IMS’ strategic alternatives. Following the agreement, IMS shareholders will receive $22 cash for each share of IMS stock they own. The transaction is likely to be completed by the first quarter of 2010.

The transaction will be financed by a combination of equity to be invested by TPG and CPPIB and debt financing to be provided by Goldman Sachs & Co., including its principal loan and mezzanine funds.

Earlier, in October, IMS announced that it is exploring several strategic alternatives. While details were not provided, we believed that the company was seeking a buyer. During the third quarterly results, IMS recorded a year-over-year decline of 6% and 7% in revenues and earnings, respectively. The decline in revenues was primarily driven by reduced spending by the clients due to the economic downturn. Barring Asia Pacific, IMS’ sales declined in both US and EMEA markets.

IMS had adopted several strategic initiatives to improve its financials. Earlier this year, IMS implemented a restructuring plan to streamline its operations, improve productivity of different operating segments, reduce capacity and align the size of its sales and management consulting teams in low demand areas, and focus on high-value, strategic growth areas. We believe, despite so many initiatives, growth did not resume due to the economic downturn, hence the decision to sell off.

IMS is the world’s leading provider of market intelligence to the pharmaceutical and healthcare industries. Operating in over 100 countries, IMS offers leading-edge market intelligence products and services that are integral to clients’ day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting & services solutions that improve productivity and the delivery of quality healthcare worldwide.

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