Quintiles, IMS Health to merge in $9-bn deal

IMS Health Holdings Inc will buy Quintiles Transnational Holdings Inc in an all-stock transaction for about $9 billion, bringing together two of the biggest providers of data and services for the pharmaceutical industry.

IMS Health shareholders will receive 0.384 share of Quintiles common stock for each of their shares, and they will own about 51.4 per cent of the combined business, according to a statement Tuesday. The transaction offers no premium compared with Monday's close. Both stocks declined in New York trading.

The combination will create an expanded pool of information for drugmakers, which are under pressure to limit costs and improve the efficiency of their research. IMS Health tracks prescriptions, medical claims and electronic records and sells the data, while Quintiles offers a range of services focused on product development, including advice on clinical-trial design - a business called a contract research organization, or CRO.

Investors may be wary of the deal because "neither side is receiving a merger-related premium from the combination" and "integration risks are higher in a merger-of-equals," John Kreger, an analyst at William Blair, said in a research note.

The transaction values IMS Health at $26.53 a share, below its closing price of $26.87 on Monday. The stock dropped 7.4 per cent to $24.87 at 10:50 am in New York. Quintiles declined 7.6 per cent to $63.86.

Quintiles' shares were down 8.2 percent at $63.41, while IMS Health's shares fell 7.5 percent to $24.85.

The offer values the all-stock deal at about $9 billion, based on 339.3 million IMS diluted shares outstanding as of Dec. 31, according to Reuters data.

William Blair analysts said initial investor reaction was muted given that neither side was receiving a merger-related premium and that integration risks are usually higher in a merger-of-equals.

"There is an interesting strategic case to be made for putting Quintiles and IMS together, particularly for late-stage, post-approval work," the analysts wrote in a note.

The merger expands on an existing research agreement between Quintiles and IMS related to clinical trials and "real world" research.

The deal is expected to add to the combined company's 2017 adjusted earnings.

IMS Health was advised by Goldman Sachs. Its legal adviser was Weil, Gotshal & Manges.

Quintiles' financial adviser was Barclays. Its legal advisers were Bryan Cave LLP and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan.