hares of PRA Health Sciences jumped nearly 18.7% on Feb. 24 after the research company inked a deal with ICON plc to be acquired in a cash-and-stock deal worth $12 billion.
Per the terms of the agreement, the provider of outsourced drug and device development and commercialization services will pay $80 in cash and 0.4125 shares of ICON for each share of PRA Health Sciences (PRAH). The price tag represents a 30% premium to PRAH’s closing price on Feb. 23. Shares of ICON dropped 7.8% at the close of trading on Feb. 24.
The transaction, which awaits shareholders’ approval and certain regulatory approvals, is expected to close in the third quarter of this year. After closure, the deal is expected to boost ICON’s (ICLR) earnings by double-digits in the first full year and by more than 20% thereafter. Combined run-rate synergies of $150 million are likely to be realized annually within four years.
Upon closing of the transaction, shareholders of PRA Health Sciences will own 34% of the combined company. (See PRAH stock analysis on TipRanks)
PRA Health Sciences CEO Colin Shannon said, “The union of PRA and ICON will create an organization that has the people, data and technology to bring those cures to patients faster and more efficiently than ever before.”
PRA Health Sciences also reported 4Q and 2020 results. The company’s 4Q adjusted earnings inched up marginally to $1.55 per share on a year-over-year basis and beat the Street estimates of $1.47 per share. Revenues increased 9.1% to $873.5 million and outpaced analysts’ expectations of $829 million.
The stock has picked up a rating from one analyst in the past three months. Robert W. Baird analyst Eric Coldwell increased the stock’s price target to $145 (4.4% downside potential) from $130 and reiterated a Buy rating more than a month ago.
PRA Health Sciences scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.