Quintiles IMS to Become Industry-Leading
Information and Technology-Enabled Healthcare Service
Provider
All-Stock Transaction with Combined 2015
Revenue of $7.2 Billion and Combined Equity Market Capitalization
of $17.6 Billion
IMS Health Holdings, Inc. (NYSE:IMS) and Quintiles Transnational
Holdings Inc. (NYSE:Q):
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- Broad range of healthcare
information, technology and services solutions to drive
efficiencies and insights across the entire life sciences product
lifecycle, from R&D through commercial execution to real-world
patient outcomes.
- Capabilities to address
mission-critical healthcare operations with a market opportunity of
more than $230 billion. Quintiles IMS will:
- Accelerate patient access to
innovative medicines by increasing the productivity of the $100
billion spent on drug development
- Demonstrate the value and
effectiveness of medicines as part of the $80 billion opportunity
for Real-World Evidence (RWE) services and connected
healthcare
- Drive a greater return on investment
from the $50 billion that life sciences companies spend annually on
commercial and field operations
- Create one of the world’s largest
portfolios of healthcare information, deep therapeutic, domain,
regulatory and commercial analytic expertise, as well as
proprietary technology applications supported by more than 50,000
employees operating in 100+ countries.
- Assemble an experienced management
team with proven track record of operational excellence.
- Offer compelling commercial,
operational and financial synergies:
- Combined annual revenue growth rate
anticipated to increase by 100 to 200 basis points by the end of
year three
- Annual run-rate cost savings
expected to be $100 million by the end of year three
- Optimized tax and capital
structure
- Accretive to Adjusted Diluted EPS in
2017
IMS Health Holdings, Inc. (NYSE:IMS) and Quintiles Transnational
Holdings Inc. (NYSE:Q) announced today that their respective boards
of directors approved a definitive merger agreement, pursuant to
which the companies will be combined in an all-stock merger of
equals transaction. The merged company will be named Quintiles IMS
Holdings, Inc. Based on the closing of IMS Health and Quintiles
common stock prices on May 2, 2016, the equity market
capitalization of the joined companies is more than $17.6 billion
and the enterprise value is more than $23 billion. The 2015 pro
forma reported revenue for Quintiles IMS was $7.2 billion; adjusted
EBITDA was $1.7 billion and adjusted unlevered free cash flow was
$1.3 billion. Please see attached appendix for reconciliation of
non-GAAP measures.
Under the terms of the merger agreement, IMS Health shareholders
will receive a fixed exchange ratio of 0.384 shares of Quintiles
common stock for each share of IMS Health common stock. Upon
completion of the merger, IMS Health shareholders will own
approximately 51.4 percent of the shares of the combined company on
a fully diluted basis and Quintiles shareholders will own
approximately 48.6 percent of the combined company on a fully
diluted basis.
Quintiles Chief Executive Officer, Tom Pike, said, “This
combination addresses life-science companies’ most pressing needs:
to transform the clinical development of innovative medicines,
demonstrate the value of these medicines in the real world, and
drive commercial success. We are bringing together two
best-in-class leaders. I’m confident that together we will make our
clients even more successful.”
Ari Bousbib, chairman and chief executive officer of IMS Health,
stated, “Together our solutions will enable differentiation in the
CRO market, advance Real-World Evidence capabilities, and deliver
comprehensive commercial solutions for our clients. This powerful
combination brings together leading technology and analytics with
deep scientific expertise delivered on a global scale by our 50,000
immensely talented professionals in more than 100 markets. Our
combined business will accelerate growth, yield greater operating
efficiencies and provide more flexibility for future
expansion.”
Strategic Rationale
- Improve clinical trial design,
recruitment and execution in the $100 billion biopharma product
development market by combining IMS Health’s rich, global
information solutions with Quintiles’ industry-leading product
development skills.
- Create a distinctive global Real-World
Evidence solutions platform by combining a leading portfolio of
anonymous patient records, technology-enabled data collection and
observational research experts to address critical healthcare
issues of cost, value and patient outcomes.
- Further differentiate commercial
analytics and outsourcing services to support the efficiency of
life sciences’ commercial organizations.
Financial Rationale
- Accelerate revenue growth, adding an
anticipated 100 - 200 basis points to the combined annual growth
rate by the end of year three.
- Expect to achieve annual run-rate cost
savings of $100M by the end of year three.
- Accretive to Adjusted Diluted EPS in
2017
- Maintain financial flexibility with
combined gross and net leverage as of December 31, 2015, of 4.0
times and 3.2 times Adjusted EBITDA, respectively.
- Optimize utilization of both companies’
tax assets.
Management, Governance and Headquarters
The combined company expects to maintain dual headquarters in
Danbury, CT, and Research Triangle Park, NC. Ari Bousbib, chairman
and chief executive officer of IMS Health, will become chairman and
chief executive officer of the merged organization. Tom Pike, chief
executive officer of Quintiles, will become vice chairman. The
company’s Board of Directors will be comprised of six directors
appointed by the Quintiles Board of Directors and six directors
appointed by the IMS Health Board of Directors. The lead director
will be Dennis Gillings, CBE, Ph.D.
Approvals and Time to Close
The transaction is subject to customary closing conditions,
including regulatory approvals and approval by both IMS Health and
Quintiles shareholders and is expected to close in the second half
of 2016. Shareholders of IMS Health owning approximately 54 percent
of the common stock of IMS Health and shareholders of Quintiles
owning approximately 25 percent of the common stock of Quintiles
have entered into agreements to vote the portion of their shares
over which they have voting power to vote in favor of the
transaction. The companies intend to refinance certain debt in
connection with the merger. Committed financing has been
obtained.
Advisors
IMS Health’s legal advisor is Weil, Gotshal & Manges LLP and
its financial advisor is Goldman, Sachs & Co. In addition,
Morris, Nichols, Arsht & Tunnell LLP served as legal advisor to
the independent committee of the IMS Health Board of Directors.
Quintiles’ legal advisors are Bryan Cave LLP and Smith, Anderson,
Blount, Dorsett, Mitchell & Jernigan, LLP, and its financial
advisor is Barclays. Simpson Thacher & Bartlett LLP served as
legal advisor to Quintiles’ independent directors.
Joint Conference Call and Webcast Details
Quintiles’ and IMS Health’s management teams will host a
conference call and webcast to discuss the merger of equals at 8:00
a.m. Eastern Time on May 3, 2016. Interested parties are invited to
listen to the live event and view the presentation slides via
webcast on IMS Health’s Investor Relations website at
http://ir.imshealth.com or on Quintiles' Investor Relations website
at www.Quintiles.com/investors. Participants can access the
handouts before the teleconference begins. The discussion also will
be available by dialing +1-800-926-5093 in the U.S. and Canada, or
+1-212-231-2934 for international callers.
A replay of the webcast will be available approximately two
hours after the conclusion of the live event on May 3, 2016. To
access the webcast recording, visit http://ir.imshealth.com or
www.Quintiles.com/investors.
About IMS Health
IMS Health (NYSE:IMS) is a leading global information and
technology services company providing clients in the healthcare
industry with end-to-end solutions to measure and improve their
performance. Our 7,000 services experts connect configurable SaaS
applications to 15+ petabytes of complex healthcare data in the IMS
One™ cloud platform, delivering unique insights into diseases,
treatments, costs and outcomes. The company’s 15,000 employees
blend global consistency and local market knowledge across 100
countries to help clients run their operations more efficiently.
Customers include pharmaceutical, consumer health and medical
device manufacturers and distributors, providers, payers,
government agencies, policymakers, researchers and the financial
community.
As a global leader in protecting individual patient privacy, IMS
Health uses anonymous healthcare data to deliver critical,
real-world disease and treatment insights. These insights help
biotech and pharmaceutical companies, medical researchers,
government agencies, payers and other healthcare stakeholders to
identify unmet treatment needs and understand the effectiveness and
value of pharmaceutical products in improving overall health
outcomes. Additional information is available at
www.imshealth.com.
About Quintiles
Quintiles (NYSE:Q) helps biopharma and other healthcare
companies improve their probability of success by connecting
insights from our deep scientific, therapeutic and analytics
expertise with superior delivery for better outcomes. From advisory
through operations, Quintiles is the world’s largest provider of
product development and integrated healthcare services, including
commercial and observational solutions. Conducting operations in
approximately 100 countries, Quintiles is a member of the Fortune
500 and has been named to Fortune’s list of the “World’s Most
Admired Companies.” To learn more, visit www.quintiles.com.
Cautionary Statements Regarding Forward Looking
Statements
This communication contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In this context,
forward-looking statements often address expected future business
and financial performance and financial condition, and often
contain words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” “will,” “would,” “target,” similar
expressions, and variations or negatives of these words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
potential timing or consummation of the proposed transaction or the
anticipated benefits thereof, including, without limitation, future
financial and operating results. IMS Health and Quintiles caution
readers that these and other forward-looking statements are not
guarantees of future results and are subject to risks,
uncertainties and assumptions that could cause actual results to
differ materially from those expressed in any forward-looking
statements. Important risk factors that may cause such a difference
include, but are not limited to risks and uncertainties related to
(i) the ability to obtain shareholder and regulatory approvals, or
the possibility that they may delay the transaction or that such
regulatory approval may result in the imposition of conditions that
could cause the parties to abandon the transaction, (ii) the risk
that a condition to closing of the merger may not be satisfied;
(iii) the ability of IMS Health and Quintiles to integrate their
businesses successfully and to achieve anticipated cost savings and
other synergies, (iv) the possibility that other anticipated
benefits of the proposed transaction will not be realized,
including without limitation, anticipated revenues, expenses,
earnings and other financial results, and growth and expansion of
the new combined company’s operations, and the anticipated tax
treatment, (v) potential litigation relating to the proposed
transaction that could be instituted against IMS Health, Quintiles
or their respective directors, (vi) possible disruptions from the
proposed transaction that could harm IMS Health’s or Quintiles’
business, including current plans and operations, (vii) the ability
of IMS Health or Quintiles to retain, attract and hire key
personnel, (viii) potential adverse reactions or changes to
relationships with clients, employees, suppliers or other parties
resulting from the announcement or completion of the merger, (ix)
potential business uncertainty, including changes to existing
business relationships, during the pendency of the merger that
could affect IMS Health’s and/or Quintiles’ financial performance,
(x) certain restrictions during the pendency of the merger that may
impact IMS Health’s or Quintiles’ ability to pursue certain
business opportunities or strategic transactions, (xi) continued
availability of capital and financing and rating agency actions,
(xii) legislative, regulatory and economic developments and (xiii)
unpredictability and severity of catastrophic events, including,
but not limited to, acts of terrorism or outbreak of war or
hostilities, as well as management’s response to any of the
aforementioned factors. These risks, as well as other risks
associated with the proposed transaction, will be more fully
discussed in the joint proxy statement/prospectus that will be
included in the registration statement on Form S-4 that will be
filed with the SEC in connection with the proposed transaction.
While the list of factors presented here is, and the list of
factors to be presented in the registration statement on Form S-4
are, considered representative, no such list should be considered
to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward looking statements.
Consequences of material differences in results as compared with
those anticipated in the forward-looking statements could include,
among other things, business disruption, operational problems,
financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on IMS Health’s
or Quintiles’ consolidated financial condition, results of
operations, credit rating or liquidity. Neither IMS Health nor
Quintiles assumes any obligation to provide revisions or updates to
any forward looking statements, whether as a result of new
information, future developments or otherwise, should circumstances
change, except as otherwise required by securities and other
applicable laws.
Note on Non-GAAP Financial Measures
Non-GAAP results, such as combined adjusted EBITDA, unlevered
free cash flow and gross debt, are presented only as a supplement
to IMS Health’s and Quintiles’ financial statements based on GAAP.
Non-GAAP financial information is provided to enhance understanding
of IMS Health’s and Quintiles’ financial performance, but none of
these non-GAAP financial measures are recognized terms under GAAP
and non-GAAP measures should not be considered in isolation from,
or as a substitute analysis for, IMS Health’s and Quintiles’
results of operations as determined in accordance with GAAP.
Definitions and reconciliations of non-GAAP measures to the most
directly comparable GAAP measures are provided within the schedules
attached to this release.
IMS Health and Quintiles use non-GAAP measures in their
respective operational and financial decision making, and believe
that it is useful to exclude certain items in order to focus on
what they regard to be a more reliable indicator of the underlying
operating performance of the business. As a result, internal
management reports feature non-GAAP measures which are also used to
prepare strategic plans and annual budgets and review management
compensation. IMS Health and Quintiles also believe that investors
may find non-GAAP financial measures useful for the same reasons,
although investors are cautioned that non-GAAP financial measures
are not a substitute for GAAP disclosures.
Non-GAAP measures are frequently used by securities analysts,
investors and other interested parties in their evaluation of
companies comparable to IMS Health and Quintiles, many of which
present non-GAAP measures when reporting their results. Non-GAAP
measures have limitations as an analytical tool. They are not
presentations made in accordance with GAAP, are not measures of
financial condition or liquidity and should not be considered as an
alternative to profit or loss for the period determined in
accordance with GAAP or operating cash flows determined in
accordance with GAAP. Non-GAAP measures are not necessarily
comparable to similarly titled measures used by other companies. As
a result, you should not consider such performance measures in
isolation from, or as a substitute analysis for, IMS Health’s and
Quintiles’ respective results of operations as determined in
accordance with GAAP.
Important Information About the Transaction and Where to Find
It
In connection with the proposed transaction, IMS Health and
Quintiles will be filing documents with the Securities and Exchange
Commission (“SEC”), including the filing by Quintiles of a
registration statement on Form S-4, and Quintiles and IMS
Health intend to mail a joint proxy statement regarding the
proposed transaction to their respective shareholders that will
also constitute a prospectus of Quintiles. After the registration
statement is declared effective, IMS Health and Quintiles plan to
mail to their respective shareholders the definitive joint proxy
statement/prospectus and may also file other documents with the SEC
regarding the proposed transaction. This document is not a
substitute for the joint proxy statement/prospectus or registration
statement or any other document which IMS Health or Quintiles may
file with the SEC. Investors and security holders of IMS Health
and Quintiles are urged to read the registration statement, the
joint proxy statement/prospectus and any other relevant documents,
as well as any amendments or supplements to these documents,
carefully and in their entirety when they become available because
they will contain important information. Investors and security
holders may obtain free copies of the registration statement and
the joint proxy statement/prospectus (when available) and other
documents filed with the SEC by IMS Health and Quintiles through
the web site maintained by the SEC at www.sec.gov or by contacting
the investor relations department of IMS Health or Quintiles at the
following:
IMS
Health
Quintiles
ir@imshealth.com
InvestorRelations@quintiles.com
+1.203.448.4600 +1.919.998.2590 Investor Relations 4820 Emperor
Boulevard 83 Wooster Heights RD PO Box 13979 Danbury, CT, 06810
Durham, North Carolina 27703
Participants in the Solicitation
IMS Health, Quintiles and certain of their respective directors,
executive officers and employees may be deemed to be participants
in the solicitation of proxies in respect of the proposed
transaction and related matters. Information regarding IMS Health’s
directors and executive officers, including a description of their
direct interests, by security holdings or otherwise, is contained
in IMS Health’s Form 10-K for the year ended December 31, 2015, and
its proxy statement filed on February 22, 2016, which are filed
with the SEC. Information regarding Quintiles’ directors and
executive officers, including a description of their direct
interests, by security holdings or otherwise, is contained in
Quintiles’ Form 10-K for the year ended December 31, 2015, and its
proxy statement filed on March 21, 2016, which are filed with the
SEC. Additional information will be available in the registration
statement on Form S-4 and the joint proxy statement/prospectus when
they become available.
No Offer or Solicitation
This communication is not intended to and shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote of approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Table 1 Quintiles Transnational Holdings Inc. and
Subsidiaries Net Income to Adjusted EBITDA
Reconciliation Twelve Months Ended December 31, 2015
(in millions)
December 31,2015
Net Income $ 387 Interest expense, Net 98
Income tax expense 159 Depreciation and amortization 128
Restructuring costs 31 Impairment 2 Loss on extinguishment of debt
8 Adjustment to estimated contingent consideration (1)
6
Adjusted EBITDA $ 819
(1) Change in estimated fair value of
contingent consideration on business combinations
Table 2 IMS Health Holdings, Inc.
Net Income to Adjusted EBITDA Reconciliation Twelve
Months Ended December 31, 2015 (in millions)
December 31,2015
Net Income $ 417 Benefit from income taxes
(200 ) Other income, net (19 ) Interest expense 169 Interest income
(3 ) Depreciation and amortization 341 Deferred revenue purchase
accounting adjustments 10 Stock-based compensation related charges
(1) 28 Restructuring and related charges (2) 91 Acquisition-related
charges (3) 51 Secondary offering expenses 1
Adjusted EBITDA $ 886
(1) Stock-based compensation related
charges are included in Operating costs of information, Direct and
incremental costs of technology services and Selling and
administrative expenses as follows:
(in millions)
December 31,2015
Operating costs of information $ 2 Direct and incremental costs of
technology services 2 Selling and administrative expenses 24
(2) Restructuring and related charges
includes severance and impairment charges and the cost of employee
and third-party charges related to dual running costs for knowledge
transfer activities. Dual running costs for knowledge transfer
activities of $3 million for the twelve months ended December 31,
2015, are primarily included in Operating costs of information.
(3) Acquisition-related charges are
included primarily in Selling and administrative expenses.
Table 3 Quintiles Transnational Holdings
Inc. and Subsidiaries Net Cash Provided by Operating
Activities to Unlevered Free Cash Flow Twelve Months
Ended December 31, 2015 (in millions)
December 31,2015
Net Cash Provided by Operating Activities $
476 Capital expenditures (78 )
Free Cash
Flow $ 397 Cash interest payments 82 Cash tax
payments, net of refunds 121 Loss on debt extinguishment 8
Restructuring payments 24
Unlevered Free
Cash Flow $ 632
Table 4 IMS Health Holdings, Inc. Net Cash
Provided by Operating Activities to Unlevered Free Cash
Flow Twelve Months Ended December 31, 2015 (in
millions)
December 31,2015
Net Cash Provided by Operating Activities $
490 Capital expenditures (52 ) Additions to computer
software (131 )
Free Cash Flow $
307 Cash interest payments 158 Cash tax payments, net of
refunds 92 Acquisition related charges (1) 51 Secondary offering
expenses 1 Severance, transaction & other payments 43 FX hedge
receipts (24 )
Unlevered Free Cash Flow
$ 628
(1) Acquisition-related charges are
included primarily in Selling and administrative expenses.
Table 5 Quintiles Transnational Holdings
Inc. and Subsidiaries Calculation of Gross Leverage
Ratio as of December 31, 2015 (in
millions) Gross Debt as of December 31,
2015 $ 2,501 Adjusted EBITDA (for the twelve
months ended December 31, 2015) $ 819
Gross Leverage Ratio (Gross Debt/LTM Adjusted EBITDA)
3.1x Cash at December 31, 2015 $
977 Net Debt $ 1,524 Adjusted
EBITDA (for the twelve months ended December 31, 2015)
$ 819 Net Leverage Ratio (Net Debt/LTM Adjusted
EBITDA) 1.9x Table 6
IMS Health Holdings, Inc. Calculation of Gross Leverage
Ratio as of December 31, 2015 (in
millions) Gross Debt as of December 31,
2015 $ 4,266 Adjusted EBITDA (for the twelve
months ended December 31, 2015) $ 886
Gross Leverage Ratio (Gross Debt/LTM Adjusted EBITDA)
4.8x Cash at December 31, 2015 $
348 Net Debt $ 3,918 Adjusted
EBITDA (for the twelve months ended December 31, 2015
$ 886 Net Leverage Ratio (Net Debt/LTM Adjusted
EBITDA) 4.4x
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IMS Health Holdings, Inc.Media Relations:Tor Constantino, +1
484-567-6732tconstantino@us.imshealth.comorInvestor Relations:Tom
Kinsley, +1 203-448-4691tkinsley@imshealth.comorQuintiles
Transnational Holdings Inc.Media Relations:Phil Bridges, +1
919-998-1653phil.bridges@quintiles.comorInvestor Relations:Todd
Kasper, +1 919-998-2590InvestorRelations@quintiles.com
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