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Kohlberg Kravis to Acquire PRA

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Kohlberg Kravis Roberts & Co. L.P. (KKR - Free Report) has entered the contract research business through its agreement to purchase clinical research firm PRA International from Calif.-based Genstar Capital LLC. This private equity investment firm shelled out approximately $1.3 billion for the deal.

The transaction is expected to be completed in the third quarter of this year. Credit Suisse Group AG (CS - Free Report) , UBS AG (UBS - Free Report) and Wells Fargo & Co. (WFC - Free Report) are acting as advisors for the deal.

PRA International, which has a record of conducting almost 2,000 clinical trials over the past 12 years, is a globally acclaimed contract research organization (CRO). Among the fastest growing companies in the CRO business, PRA International also boasts healthy client relationship and therapeutic expertise.

Private equity firm Genstar acquired PRA International in a take-private deal in 2007 for $797 million. Since then, PRA International’s European operations have been expanding, along with the company’s expertise and enhanced infrastructure. Notably, PRA International has generated higher revenues and earnings than its industry peers.

However, Genstar failed in its attempt to sell the CRO business in 2011. Recently, the market was abuzz with the news of PRA going public, similar to Quintiles Transnational Holdings Inc.

For Kohlberg Kravis Roberts, PRA marks its second healthcare investment over the past one year. In Jun 2012, it announced an investment in GenesisCare, an Australia-wide network of cancer and cardiovascular care centers. Since 1995, KKR has invested roughly $9 billion in healthcare globally.

In the recent past, the pharmaceutical industry has witnessed many mergers, with 17 moderate to large deals taking place over the last 4 years. Clinical research service firms are either being acquired by private equity firms or are becoming public, with healthy investor demand. The CRO market is expected to be more profitable, given the rising number of pharmaceutical companies that are outsourcing the research necessary to enable drugs to meet regulatory standards.

Kohlberg Kravis Roberts currently carries a Zacks Rank #3 (Hold).

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