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IMS Health, Quintiles announce merger

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Post merger, IMS Health to own 51.4 per cent of shares of combined entity

IMS Health Holdings and Quintiles Transnational Holdings announced today that their respective boards of directors approved a definitive merger agreement, after 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 capitalisation 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. 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 per cent of the shares of the combined company on a fully diluted basis and Quintiles shareholders will own approximately 48.6 per cent of the combined company on a fully diluted basis.

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 organisation. 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. The transaction is is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals and approval by shareholders of both companies.

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.”

The strategic rationale for the merger is to 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. The merger is expected to 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. This merger will further differentiate commercial analytics and outsourcing services to support the efficiency of life sciences’ commercial organisations.

From a financial point of view, the merger will accelerate revenue growth, adding an anticipated 100 – 200 basis points to the combined annual growth rate by the end of year three. The merger is expected to achieve annual run-rate cost savings of $100 million by the end of year three. It will be accretive to adjusted diluted EPS in 2017 and will 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. The merger will also optimise utilisation of both companies’ tax assets.

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