PPD will offer public stock to reduce its debt – StarNewsOnline.com

Analysts say initial public offering of stock could raise $1 billion for Wilmington-based company

WILMINGTON — Privately owned PPD, one of the Port City’s largest employers, wants to sell stock on a national exchange again, and the stated purpose is very clear — paying down debt.

In a filing Thursday with the federal Securities and Exchange Commission, PPD said it intends to make an initial public offering of stock, a move that IPO analyst Renaissance Capital said could raise an estimated $1 billion.

The company, which provides contract research and development services for the pharmaceutical industry, was once publicly traded. In 2011, however, Wilmington was shocked (and nervous) when the homegrown company was acquired by private equity funds The Carlyle Group and Hellman & Friedman. In 2017, Abu Dhabi Investment Authority and Singapore’s sovereign wealth fund joined the ownership group.

The IPO is not a surprise. PPD took the first step toward listing shares on a national exchange when it submitted a draft registration statement with the SEC in November. Thursday’s filing said It plans to list on the Nasdaq exchange under the symbol PPD.

Started as a one-man operation in 1985 by University of North Carolina-Chapel Hill pharmacy graduate Fred Eshelman, PPD has grown into one of the world’s largest providers of outsourced clinical research. The company has 23,000 employees in 46 countries, including roughly 1,500 at its downtown Wilmington headquarters.

Eshelman moved his small business to Wilmington in 1986, and it became a public corporation in 1996, with shares traded on the Nasdaq Stock Market. In addition to helping the health-research industry develop in Wilmington, the opening of its new headquarters in 2007 sparked a massive redevelopment of the north end of downtown that continues today. The 12-story, shiny glass structure stands in stark contrast to the heavy, often dirty, industries once located there, and is now surrounded by new apartment buildings and condos with hundreds of residents moving into the area.

When news broke in November that PPD was considering going public, Dr. Ethan Watson, an assistant professor of finance and economics at the University of North Carolina Wilmington (UNCW), said it was hard to know exactly what was behind the move or what it might mean for the long-term status of the company.

Watson said an IPO could be for something as simple as raising money to allow the company to grow or acquire other businesses or also could be part of an exit strategy of the company’s private equity owners as they look to cash in.

With Thursday’s filing, it became clear that proceeds from the IPO would be used to redeem $1.45 billion in debt notes (plus accrued and unpaid interest) that PPD’s holding company, Eagle II, previously issued for a recapitalization and a special dividend. The filing said cash on hand also would be used.

As large pharmaceutical companies increasingly outsource development and clinical trials for new drugs to companies like PPD, analysts expect the contract research market to keep growing at roughly 8 percent a year through 2030.

Renaissance Capital, the IPO tracker, said PPD “booked $4.0 billion in revenue for the 12 months ended September 30, 2019.”

According to Donovan Jones, an analyst with IPO Edge, PPD, like many private equity-owned IPO candidates, has a large debt load, which weighs on its financial results.

The firm’s financials indicate it is continuing to grow but at a decelerating rate of growth, which is concerning, Donovan said.

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