TPG, CPPIB team up for $5.2bn pharma buyout

The take-private of IMS Health, comprising $4bn in equity and $1.2bn in debt, is the biggest buyout proposed this year.

TPG and the Canadian Pension Plan Investment Board have agreed to buy pharmaceutical information provider IMS Health in a deal valued at $5.2 billion, which includes $4 billion and the assumption of $1.2 billion in debt.

If the deal closes, it would the biggest leveraged buyout in 2009, topping the pending $2.7 billion buyout of Busch Entertainment by the Blackstone Group, which was agreed last month. Deal activity has only started heating up toward the end of the year. 

TPG and CPPIB would pay $22 per share for the company, a 31 percent premium over the company’s closing share price on Wednesday and a 50 percent premium over the closing price on 16 October, the day before speculation of a possible sale became public.

The deal includes equity contributions of $4 billion by the firms and debt financing to be provided by affiliates of Goldman Sachs, including its principal loan and mezzanine funds.

The transaction is expected to close in the first quarter of 2010 and requires approval of IMS shareholders and regulatory approvals.

Earlier this week, TPG disclosed a $500 million investment in the debt and equity of natural gas industry firm Valerus Compression Services.

The firm, which was ranked the world’s largest in the PEI 300, also recently exited its remaining investment in British retail group Debenhams, which it sold to an unnamed buyer for £96 million.

TPG closed its sixth buyout fund on $19.8 billion last year, but in a gesture meant to help liquidity-starved LPs, it later allowed them to reduce commitments by up to 10 percent, ultimately shrinking the fund’s size by about $1 billion. The firm also allowed LPs to cut commitments to its Asia-focused and financial services fund.

CPPIB, meanwhile, saw the value of its private equity portfolio drop by $2.9 billion for fiscal year 2009, which ended 31 March. The pension, which does both direct investing and commitments to external managers, also reported declines of $155 million in infrastructure and $1.1 billion in real estate investments.

Still, the pension has continued investing in private equity deals. CPPIB teamed up with US private equity firm Sterling Partners in October to buy Livingston International, a company structured as a Canadian income trust. Media reports at the time of the deal announcement pegged the value of the transaction at C$273 million (€174 million; $257 million).