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Kohlberg Kravis to Acquire RPS

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Kohlberg Kravis Roberts & Co. L.P. (KKR - Free Report) announced an agreement to purchase clinical research firm ReSearch Pharmaceutical Services Inc (RPS) from N.Y.-based global private equity firm, Warburg Pincus. This agreement marks Kohlberg Kravis Roberts’ second investment in a contract research organization (CRO), within 2 months of its agreement to buy PRA International from California-based Genstar Capital LLC in Jun-end.

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 Citigroup, Inc. (C - Free Report) are acting as advisors for the deal.

Founded in 1998, ReSearch Pharmaceutical Services, which operates in over 64 countries, is a leader in outsourced clinical development services. The company is primarily known for its notable contribution in the Embedded model of functional clinical development outsourcing.

On completion of both the deals, Kohlberg Kravis Roberts plans to merge PRA International and ReSearch Pharmaceutical Services. PRA International’s Chief Executive Officer Colin Shannon is expected to head the combined entity. ReSearch Pharmaceutical Services will operate as the Strategic Solutions Unit of PRA International.

For Kohlberg Kravis Roberts, the latest deal will mark its third healthcare investment in a little over the past one year. In Jun 2012, the company announced an investment in GenesisCare, an Australia-wide network of cancer and cardiovascular care centers. Since 1995, Kohlberg Kravis Roberts has invested about $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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