- ICON PLC is a Contract Research Organization that generated revenues of $2.8bn in FY20, and whose share price is +173% over a five-year period.
- Having potentially reached its rapid growth ceiling, the company has taken the decision to acquire its closest-matched sector rival PRA Health in a $12bn deal.
- It's an obvious and sensible merger that turns the fifth and sixth largest CROs in biotech into the second or third largest.
- It ought to be share price accretive too, although long-term revenue growth is likely to be somewhat modest, ruling out sudden spikes and excess volatility.
- I previously set a price target for ICON of $220 - $250 but feel that $220 is now more likely by Q321 when the deal closes. ICON is a solid investment opportunity but could find more ways to reward investors i.e. a dividend or further leveraging.
For further details see:
ICON PLC: PRA Health Deal A No Brainer, Companies Are Better Together, But It's Marginal