Full Press Release Details
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On February 24, 2021, ICON entered into a Merger Agreement with PRA Health Sciences, Inc. ("PRA"), ICON US Holdings Inc., a Delaware corporation and subsidiary of ICON ("US HoldCo"), and Indigo
Merger Sub, Inc., a Delaware corporation and subsidiary of ICON and US HoldCo ("Merger Subsidiary"). Upon the terms and subject to the conditions of the Merger Agreement, Merger Subsidiary will merge with and into PRA (the "Merger"), with PRA
surviving as a subsidiary of ICON and US HoldCo (the "Surviving Corporation"). The following unaudited pro forma condensed combined financial information of ICON and PRA is presented to illustrate the estimated effects of the Merger, which estimated
effects are collectively referred to as adjustments or transaction accounting adjustments.
The Unaudited Pro Forma Condensed Combined Balance Sheet at March 31, 2021 is presented as if the Merger had occurred on March 31, 2021. The Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 2020, the three month period ended March 31, 2020 and the three month period ended March 31, 2021 are presented as if the Merger had occurred on January 1, 2020, the beginning of the earliest period
presented. These Unaudited Pro Forma Condensed Combined Statements of Operations and Unaudited Pro Forma Condensed Combined Balance Sheet are collectively referred to as the unaudited pro forma financial information. The unaudited pro forma financial
information is based on the historical consolidated financial statements of ICON and PRA, and the assumptions and adjustments set forth in the accompanying explanatory notes.
The unaudited pro forma financial information for the Merger has been developed from and should be read in conjunction with the ICON audited consolidated financial statements contained in the ICON
Form 20-F for the year ended December 31, 2020, the ICON unaudited condensed consolidated financial statements contained in the ICON Form 6-K for the three month period ended March 31, 2021, the PRA audited consolidated financial statements contained
in the PRA Form 10-K for the year ended December 31, 2020 and the PRA unaudited condensed consolidated financial statements contained in the PRA Form 10-Q for the three month period ended March 31, 2021, which are incorporated by reference into this
offering memorandum.
The Merger will be accounted for using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 805 "Business
Combinations" with ICON considered the acquirer of PRA. ICON will record assets acquired, including identifiable intangible assets, and liabilities assumed from PRA, at their respective fair values at the date of completion of the Merger. For
purposes of developing the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2021, the acquired PRA assets, including identifiable intangible assets, and liabilities assumed have been recorded at their estimated fair values with
the excess purchase price assigned to goodwill as described under Note 3 to the Unaudited Pro Forma Condensed Combined Financial Information below. The estimated fair values assigned in this unaudited pro forma financial information are preliminary
and represent ICON's current best estimate of fair value and are subject to revision. The unaudited pro forma financial information, prepared under Article 11 of Regulation S-X issued by the SEC, is provided for informational purposes only and is
based on available information and assumptions that ICON believes are reasonable. It does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined entity would have been had
the Merger occurred on the dates indicated, nor is it necessarily indicative of future consolidated results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps significantly,
from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified and changes in operating results following the date of the pro forma financial information.
Upon closing of the Merger, each share of PRA common stock will be converted into 0.4125 of a share of ICON ordinary shares. This exchange ratio will not be adjusted for changes in the market price
or number of shares outstanding of either ICON ordinary shares or PRA common stock between the date of signing the Merger Agreement and completion of the Merger.
For purposes of this unaudited pro forma financial information, giving effect to the exchange ratio described above, the estimated aggregate consideration to complete the Merger would have been $12.8
billion. This amount was derived based on the 64.77 million shares of PRA common stock (other than Cancelled Shares, Dissenting Shares and Subsidiary-Held Shares) outstanding on March 31, 2021, the cash consideration of $80.00 per share, the exchange
ratio and a per share price of $223.76, which represents the closing price of ICON ordinary shares on May 31, 2021. The purchase price also includes the estimated fair value of $411.5 million for PRA equity awards held by employees of PRA that will
be exchanged for ICON equity awards and the repayment of $1.3 billion of PRA's indebtedness.
The accounting standards require that the equity consideration transferred be measured at the date the Merger is completed at the then-current market price. This requirement will likely result in a
total consideration that is different from the amount presented in this unaudited pro forma financial information. Based on the 64.77 million shares of PRA common stock outstanding as of March 31, 2021 and the exchange ratio, a 10%
increase/(decrease) in the per share price of the ICON ordinary shares as of May 31, 2021 would result in an $629.3 million increase/(decrease) in the total consideration for the Merger, substantially all of which ICON expects would be recorded as an
increase/(decrease) in the amount of goodwill. The number of outstanding shares of PRA common stock will change prior to the closing of the Merger due to transactions in the normal course of business, including the vesting and/or exercise of
outstanding PRA equity awards. This change is not expected to have a material effect on this unaudited pro forma financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT MARCH 31, 2021
| March 31, 2021 | ICON Historical | PRA Historical | Reclassifications ( See Section 4a) | Transaction Adjustments (See S ection 3 & 4 ) | Notes | Pro Forma Surviving Corporation | |||||||||||||
| ASSETS | (in thousands) | ||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | 942,455 | $ | 690,259 | $ | - | $ | (535,191) | 3(a), 4(f) | $ | 1,097,523 | ||||||||
| Available for sale investments | 1,729 | - | - | - | 1,729 | ||||||||||||||
| Accounts receivable, net | 659,710 | - | 585,569 | - | 1,245,279 | ||||||||||||||
| Unbilled revenue | 416,352 | - | 193,777 | - | 610,129 | ||||||||||||||
| Accounts receivable and unbilled services, net | - | 779,346 | (779,346) | - | - | ||||||||||||||
| Other receivables | 31,552 | - | 26,853 | - | 58,405 | ||||||||||||||
| Prepayments and other current assets | 87,273 | 126,156 | (38,041) | (20,408) | 4(f) | 154,980 | |||||||||||||
| Income taxes receivable | 29,996 | - | 11,188 | 20,784 | 4(d) | 61,968 | |||||||||||||
| Total current assets | $ | 2,169,067 | $ | 1,595,761 | $ | - | $ | (534,815) | $ | 3,230,013 | |||||||||
| Other Assets: | |||||||||||||||||||
| Property, plant and equipment, net | $ | 165,582 | $ | 192,462 | $ | - | $ | - | $ | 358,044 | |||||||||
| Goodwill | 927,738 | 1,690,464 | - | 6,267,686 | 4(c) | 8,885,888 | |||||||||||||
| Operating right-of-use assets | 74,801 | 170,091 | - | - | 244,892 | ||||||||||||||
| Other non-current assets | 21,309 | 52,797 | (15,696) | (2,502) | 3(a) | 55,908 | |||||||||||||
| Non-current income taxes receivable | 12,055 | - | 1,747 | - | 13,802 | ||||||||||||||
| Non-current deferred tax asset | 12,552 | - | 13,949 | 3,774 | 3(a), 4(f) | 30,275 | |||||||||||||
| Equity method investments | 4,260 | - | - | - | 4,260 | ||||||||||||||
| Investments in equity-long term | 18,614 | - | - | - | 18,614 | ||||||||||||||
| Intangible assets | 60,598 | 581,170 | - | 5,011,830 | 4(c) | 5,653,598 | |||||||||||||
| Total Assets | $ | 3,466,576 | $ | 4,282,745 | $ | - | $ | 10,745,973 | $ | 18,495,294 | |||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Accounts payable | $ | 48,103 | $ | 46,478 | $ | - | $ | - | $ | 94,581 | |||||||||
| Unearned revenue | 610,477 | - | 732,641 | (15,000) | 4(e) | 1,328,118 | |||||||||||||
| Accrued expenses and other current liabilities | - | 388,361 | (388,361) | - | - | ||||||||||||||
| Other liabilities | 404,988 | - | 412,452 | 123,771 | 3(a), 4(d), 4(f) | 941,211 | |||||||||||||
| Income taxes payable | 16,666 | - | 14,680 | - | 31,346 | ||||||||||||||
| Current portion of operating lease liabilities | - | 38,771 | (38,771) | - | - | ||||||||||||||
| Advanced billings | - | 732,641 | (732,641) | - | - | ||||||||||||||
| Current portion of borrowings under credit facilities | - | 91,300 | - | 6,200,140 | 3(a), 4(f) | 6,291,440 | |||||||||||||
| Current portion of long-term debt | - | 25,000 | - | (25,000) | 3(a) | - | |||||||||||||
| Total current liabilities | $ | 1,080,234 | $ | 1,322,551 | $ | - | $ | 6,283,911 | $ | 8,686,696 |
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT MARCH 31, 2021 (continued)
| March 31, 2021 | ICON Historical | PRA Historical | Reclassifications (See Section 4a) | Transaction Adjustments (See Section 3 & 4) | Notes | Pro Forma Surviving Corporation | |||||||||||||
| (in thousands) | |||||||||||||||||||
| Other Liabilities: | |||||||||||||||||||
| Non-current bank credit lines and loan facilities | $ | 348,592 | $ | 1,152,663 | $ | - | $ | (1,501,255) | 3(a), 4(f) | $ | - | ||||||||
| Non-current operating lease liabilities | 52,182 | 150,551 | - | - | 202,733 | ||||||||||||||
| Non-current other liabilities | 26,279 | 52,134 | (4,253) | - | 74,160 | ||||||||||||||
| Non-current government grants | 795 | - | 1,039 | - | 1,834 | ||||||||||||||
| Non-current income taxes payable | 14,466 | - | 3,214 | - | 17,680 | ||||||||||||||
| Non-current deferred tax liability | 9,857 | 48,324 | - | 1,276,004 | 4(c), 4(e), 4(h) | 1,334,185 | |||||||||||||
| Total Liabilities | $ | 1,532,405 | $ | 2,726,223 | $ | - | $ | 6,058,660 | $ | 10,317,288 | |||||||||
| Shareholders' Equity: | |||||||||||||||||||
| Share Capital | $ | 4,585 | $ | 648 | $ | - | $ | 1,303 | 3(b), 4(i) | $ | 6,536 | ||||||||
| Additional paid-in capital | 623,409 | 1,174,096 | - | 5,213,329 | 3(b), 4(i) | 7,010,834 | |||||||||||||
| Other undenominated capital | 1,134 | - | - | - | 1,134 | ||||||||||||||
| Accumulated other comprehensive loss | (54,974) | (115,487) | - | 116,321 | 4(i), 4(f) | (54,140 | ) | ||||||||||||
| Retained earnings | 1,360,017 | 497,265 | - | (643,640) | 4(i), 4(d), 4(f) | 1,213,642 | |||||||||||||
| Total Shareholders' Equity | $ | 1,934,171 | $ | 1,556,522 | $ | - | $ | 4,687,313 | $ | 8,178,006 | |||||||||
| Total Liabilities and Shareholders' Equity | $ | 3,466,576 | $ | 4,282,745 | $ | - | $ | 10,745,973 | $ | 18,495,294 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD MARCH 31, 2021
| March 31, 2021 | ICON Historical | PRA Historical | Reclassifications (See Section 4a) | Transaction Adjustments (See Section 3 & 4) | Notes | Pro Forma Surviving Corporation | ||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| Revenue | $ | 858,198 | $ | 933,775 | $ | - | $ | (76) | 4(b) | $ | 1,791,897 | |||||||||
| Costs and expenses: | ||||||||||||||||||||
| Direct costs | 626,244 | 472,010 | 223,352 | (350) | 4(b), 4(h) | 1,321,256 | ||||||||||||||
| Reimbursable expenses | - | 223,352 | (223,352) | - | - | |||||||||||||||
| Selling, general and administrative | 98,535 | 122,778 | 1,219 | (906) | 4(h) | 221,626 | ||||||||||||||
| Depreciation and amortization | 17,405 | 32,568 | - | 92,530 | 4(c) | 142,503 | ||||||||||||||
| Restructuring | - | - | - | - | - | |||||||||||||||
| Transaction-related costs | - | 13,436 | (13,436) | - | - | |||||||||||||||
| Loss on disposal of fixed assets | - | 123 | (123) | - | - | |||||||||||||||
| Total costs and expenses | $ | 742,184 | $ | 864,267 | $ | (12,340) | $ | 91,274 | $ | 1,685,385 | ||||||||||
| Income/(loss) from operations | $ | 116,014 | $ | 69,508 | $ | 12,340 | $ | (91,350) | $ | 106,512 | ||||||||||
| Interest income | 257 | - | - | - | 257 | |||||||||||||||
| Interest expense | (2,727) | (5,212) | - | (56,990) | 4(f) | (64,929 | ) | |||||||||||||
| Foreign currency gain/losses net | - | 12,388 | (12,388) | - | - | |||||||||||||||
| Other (expense) income, net | - | (48) | 48 | - | - | |||||||||||||||
| Income/(loss) before income taxes expense | $ | 113,544 | $ | 76,636 | $ | - | $ | (148,340) | $ | 41,840 | ||||||||||
| Income tax (expense)/credit | (16,148) | (19,696) | - | 34,754 | 4(g) | (1,090 | ) | |||||||||||||
| Income before share of earnings from equity method investments | $ | 97,396 | $ | 56,940 | $ | - | $ | (113,586) | $ | 40,750 | ||||||||||
| Share of equity method investments | (274) | - | - | - | (274 | ) | ||||||||||||||
| Net Income/(loss) | $ | 97,122 | $ | 56,940 | $ | - | $ | (113,586) | $ | 40,476 | ||||||||||
| Net income attributable to noncontrolling interest | - | - | - | - | - | |||||||||||||||
| Net income/(loss) | $ | 97,122 | $ | 56,940 | $ | - | $ | (113,586) | $ | 40,476 | ||||||||||
| Net income/(loss) per Ordinary Share | ||||||||||||||||||||
| Basic | $ | 1.84 | 4(j) | $ | 0.51 | |||||||||||||||
| Diluted | $ | 1.82 | 4(j) | $ | 0.50 | |||||||||||||||
| Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||
| Basic | 52,811,460 | 4(j) | 79,272,098 | |||||||||||||||||
| Diluted | 53,310,453 | 4(j) | 80,605,578 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020
| December 31, 2020 | ICON Historical | PRA Historical | Reclassifications (See Section 4a) | Transaction Adjustments (See Section 3 & 4) | Notes | Pro Forma Surviving Corporation | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||
| Revenue | $ | 2,797,288 | $ | 3,183,365 | $ | - | $ | (15,666 | ) | 4(b), 4(e) | $ | 5,964,987 | ||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||
| Direct costs | 1,979,883 | 1,649,001 | 665,761 | 32,035 | 4(b) ,4(h) | 4,326,680 | ||||||||||||||||||
| Reimbursable expenses | - | 665,761 | (665,761 | ) | - | - | ||||||||||||||||||
| Selling, general and administrative | 341,690 | 453,032 | (18,648 | ) | 260,372 | 4(d), 4(h) | 1,036,446 | |||||||||||||||||
| Depreciation and amortization | 66,126 | 131,630 | - | 365,419 | 4(c) | 563,175 | ||||||||||||||||||
| Restructuring | 18,089 | - | - | - | 18,089 | |||||||||||||||||||
| Transaction-related costs | - | (44,465 | ) | 44,465 | - | 4(k) | - | |||||||||||||||||
| Loss on disposal of fixed assets | - | 317 | (317 | ) | - | - | ||||||||||||||||||
| Total costs and expenses | $ | 2,405,788 | $ | 2,855,276 | $ | 25,500 | $ | 657,826 | $ | 5,944,390 | ||||||||||||||
| Income/(loss) from operations | $ | 391,500 | $ | 328,089 | $ | (25,500 | ) | $ | (673,492 | ) | $ | 20,597 | ||||||||||||
| Interest income | 2,724 | - | 324 | - | 3,048 | |||||||||||||||||||
| Interest expense | (13,019 | ) | (43,130 | ) | (774 | ) | (251,606 | ) | 4(f) | (308,529 | ) | |||||||||||||
| Loss on modification or extinguishment of debt | - | (450 | ) | 450 | - | - | ||||||||||||||||||
| Foreign currency gain/ losses, net | - | (25,499 | ) | 25,499 | - | - | ||||||||||||||||||
| Other (expense) income, net | - | (1 | ) | 1 | - | - | ||||||||||||||||||
| Income/(loss) before income taxes expense | $ | 381,205 | $ | 259,009 | $ | - | $ | (925,098 | ) | $ | (284,884 | ) | ||||||||||||
| Income tax (expense)/credit | (47,875 | ) | (61,966 | ) | - | 178,682 | 4(g) | 68,841 | ||||||||||||||||
| Income before share of earnings from equity method investments | $ | 333,330 | $ | 197,043 | $ | - | $ | (746,416 | ) | $ | (216,043 | ) | ||||||||||||
| Share of equity method investments | (366 | ) | - | - | - | $ | (366 | ) | ||||||||||||||||
| Net Income/(loss) | $ | 332,964 | $ | 197,043 | $ | - | $ | (746,416 | ) | $ | (216,409 | ) | ||||||||||||
| Net income attributable to noncontrolling interest | (633 | ) | - | - | - | (633 | ) | |||||||||||||||||
| Net income/(loss) | $ | 332,331 | $ | 197,043 | $ | - | $ | (746,416 | ) | $ | (217,042 | ) | ||||||||||||
| Net income/(loss) per Ordinary Share: | ||||||||||||||||||||||||
| Basic | $ | 6.20 | 4(j) | $ | (2.80 | ) | ||||||||||||||||||
| Diluted | $ | 6.15 | 4(j) | $ | (2.80 | ) | ||||||||||||||||||
| Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||||||
| Basic | 52,859,911 | 4(j) | 78,992,611 | |||||||||||||||||||||
| Diluted | 53,283,585 | 4(j) | 78,992,611 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2020
| March 31, 2020 | ICON Historical | PRA Historical | Reclassifications (See Section 4a) | Transaction Adjustments (See Section 3 & 4) | Notes | Pro Forma Surviving Corporation | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||
| Revenue | $ | 715,102 | $ | 783,708 | $ | - | $ | (7,751 | ) | 4(b), 4(e) | $ | 1,491,059 | ||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||
| Direct costs | 505,293 | 403,862 | 176,841 | 17,431 | 4(b), 4(h) | 1,103,427 | ||||||||||||||||||
| Reimbursable expenses | - | 176,841 | (176,841 | ) | - | - | ||||||||||||||||||
| Selling, general and administrative | 87,196 | 106,957 | (7,248 | ) | 197,778 | 4(d), 4(h) | 384,683 | |||||||||||||||||
| Depreciation and amortization | 16,322 | 32,278 | - | 91,330 | 4(c) | 139,930 | ||||||||||||||||||
| Restructuring | - | - | - | - | - | |||||||||||||||||||
| Transaction-related costs | - | 609 | (609 | ) | - | - | ||||||||||||||||||
| Loss on disposal of fixed assets | - | (19 | ) | 19 | - | - | ||||||||||||||||||
| Total costs and expenses | $ | 608,811 | $ | 720,528 | $ | (7,838 | ) | $ | 306,539 | 1,628,040 | ||||||||||||||
| Income/(loss) from operations | $ | 106,291 | $ | 63,180 | $ | 7,838 | $ | (314,290 | ) | $ | (136,981 | ) | ||||||||||||
| Interest income | 1,809 | - | - | - | 1,809 | |||||||||||||||||||
| Interest expense | (3,181 | ) | (13,487 | ) | - | (67,061 | ) | 4(f) | (83,729 | ) | ||||||||||||||
| Loss on modification or extinguishment of debt | - | - | - | - | - | |||||||||||||||||||
| Foreign currency gain/losses, net | - | 7,842 | (7,842 | ) | - | - | ||||||||||||||||||
| Other (expense) income, net | - | (4 | ) | 4 | - | - | ||||||||||||||||||
| Income/(loss) before income taxes expense | $ | 104,919 | $ | 57,531 | $ | - | $ | (381,351 | ) | (218,901 | ) | |||||||||||||
| Income tax (expense)/credit | (12,590 | ) | (16,871 | ) | - | 59,737 | 4(g) | 30,276 | ||||||||||||||||
| Income before share of earnings from equity method investments | $ | 92,329 | $ | 40,660 | $ | - | $ | (321,614 | ) | (188,625 | ) | |||||||||||||
| Share of equity method investments | - | - | - | - | - | |||||||||||||||||||
| Net Income/(loss) | $ | 92,329 | $ | 40,660 | $ | - | $ | (321,614 | ) | (188,625 | ) | |||||||||||||
| Net income attributable to noncontrolling interest | (633 | ) | - | - | - | (633 | ) | |||||||||||||||||
| Net income/(loss) | $ | 91,696 | $ | 40,660 | $ | - | $ | (321,614 | ) | (189,258 | ) | |||||||||||||
| Net income/(loss) per Ordinary Share: | ||||||||||||||||||||||||
| Basic | $ | 1.63 | 4(j) | $ | (2.44 | ) | ||||||||||||||||||
| Diluted | $ | 1.62 | 4(j) | $ | (2.44 | ) | ||||||||||||||||||
| Weighted average number of ordinary shares outstanding: | ||||||||||||||||||||||||
| Basic | 53,348,355 | 4(j | ) | 79,308,218 | ||||||||||||||||||||
| Diluted | 53,905,022 | 4(j | ) | 79,308,218 |
Notes to Unaudited Pro Forma Condensed Combined Financial Information
1. Description of Merger
On February 24, 2021, ICON entered into a merger agreement with PRA, US HoldCo, and Merger Subsidiary. Upon the terms and subject to the conditions of the Merger Agreement, Merger Subsidiary will
merge with and into PRA, with PRA surviving as a subsidiary of ICON and US HoldCo.
Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock of PRA issued and outstanding immediately prior to the Effective Time (other
than any Cancelled Shares, any Dissenting Shares and any Subsidiary-Held Shares), will be converted into the right to receive (i) from ICON, 0.4125 of one ordinary share of ICON (the "Share Consideration") and (ii) from US HoldCo and the Surviving
Corporation, $80.00 in cash, without any interest thereon (the "Cash Consideration").
On February 24, 2021, ICON also entered into a debt commitment letter (the "Commitment Letter") to provide for commitments of up to $6.06 billion of bridge loans (the "Bridge Facility") from
certain financial institutions (the "Commitment Parties") for the purposes of funding a portion of the consideration for the Merger, repaying the Existing ICON Indebtedness and the Existing PRA Indebtedness and paying all or a portion of the
Further, all of PRA's outstanding share-based compensation will be replaced with similar ICON awards as described in note 4h. Share based compensation.
2. Basis of Presentation
The unaudited pro forma financial information was prepared by accounting for the Merger using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") Topic
805, "Business Combinations," which is referred to as ASC 805, and is derived from the audited historical financial statements of ICON and PRA.
The unaudited pro forma financial information has been prepared by ICON in accordance with SEC Regulation S-X Article 11. The unaudited pro forma financial information is not necessarily indicative
of what ICON's consolidated statements of operations or consolidated balance sheet would have been had the Merger been completed as of the dates indicated or will be for any future periods. The unaudited pro forma financial statements do not
purport to project the future financial position or results of operations of ICON following the completion of the Merger. The unaudited pro forma financial information reflects transaction adjustments management believes are necessary to present
fairly ICON's pro forma results of operations and financial position following the closing of the Merger as of and for the periods indicated. The transaction adjustments are based on currently available information and assumptions management
believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report ICON's financial condition and results of operations as if the Merger was completed.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, "Fair Value Measurements and Disclosures," which is referred to as ASC 820. Fair value is defined in ASC 820 as
"the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Fair value measurements can be highly subjective and can involve a high degree of
The determination of the fair value of the identifiable assets of PRA and the allocation of the estimated consideration to these identifiable assets and liabilities is preliminary and is pending
finalization of various estimates, inputs and analyses. Since this unaudited pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the Merger, the actual amounts eventually
recorded for the purchase accounting, including the identifiable intangibles and goodwill, may differ materially from the information presented.
The initial allocation of the preliminary estimated equity portion of the consideration for the Merger in this unaudited pro forma financial information is based upon the estimated value of such
equity consideration as of May 31, 2021.
At this preliminary stage, the estimated identifiable finite lived intangible assets include customer relationships, order backlog, tradenames, database and technology assets. Goodwill represents
the excess of the estimated purchase price over the estimated fair value of PRA's identifiable assets and liabilities, including the fair value of the estimated identifiable finite assets described above. Goodwill will not be amortized but will be
subject to periodic impairment testing. The goodwill balance shown in the unaudited pro forma financial information is preliminary and subject to change as a result of the same factors affecting both the estimated consideration and the estimated
fair value of identifiable assets and liabilities acquired. The goodwill balance represents the combined company's expectations of the strategic opportunities available to it as a result of the Merger, as well as other synergies that will be
derived from the Merger.
Upon consummation of the Merger and the completion of a formal valuation study, the estimated fair value of the employee equity awards replaced, and fair value of the acquired assets and
liabilities will be updated, including the estimated fair value and useful lives of the identifiable intangible assets and allocation of the excess purchase price, if any, to goodwill. The calculation of goodwill and other identifiable intangible
assets could be materially impacted by changing fair value measurements caused by the volatility in the current market environment. Under ASC 805, transaction costs related to the Merger are expensed in the period they are incurred. Total
transaction related costs incurred by ICON and PRA in connection with the Merger are estimated to be approximately $137.0 million. To the extent that they are not already paid, the transaction costs incurred by ICON and PRA are reflected as a
liability in the Unaudited Pro Forma Condensed Combined Balance Sheet. In the three month period ended March 31, 2021, ICON incurred transaction costs of $12.9 million and PRA incurred transaction costs of $13.4 million. The remaining amount is
reflected as an expense in the Unaudited Condensed Combined Statement of Operations for the year ended December 31, 2020. These costs are non-recurring.
The unaudited pro forma financial information does not reflect the following items:
3. Preliminary Purchase Consideration
The fair value of the Merger consideration, or the purchase price, in the unaudited pro forma financial information is estimated to be approximately $12.8 billion. This amount was derived based on
the 64.77 million shares of PRA common stock (other than Cancelled Shares, Dissenting Shares and Subsidiary-Held Shares) outstanding on March 31, 2021, the cash consideration of $80.00 per share, the exchange ratio and a per share price of $223.76,
which represents the closing price of ICON ordinary shares on May 31, 2021. The actual number of shares of ICON ordinary shares issued to PRA stockholders upon closing of the Merger will be based on the actual number of shares of PRA common stock
outstanding when the Merger closes, and the valuation of those shares will be based on the per share price of ICON ordinary shares at that time. PRA equity awards outstanding whether or not vested or exercisable will be converted into ICON equity
awards after giving effect to the exchange ratio. The terms of these awards, including vesting provisions, will be consistent to those of the historical PRA equity awards. The fair value of PRA equity awards attributable to pre-combination service
that will be assumed by ICON upon completion of the Merger will be considered part of the purchase price. Accordingly, the purchase price includes estimated fair values for PRA equity awards of $411.5 million.
On the date of consummation of the Merger (the "Merger Date"), the Existing PRA Indebtedness shall be repaid in connection with the Merger. For purposes of the unaudited pro forma condensed
combined balance sheet, based on the amounts of Existing PRA Indebtedness reflected as outstanding on the PRA balance sheet as of March 31, 2021, which is assumed to be the Merger Date for the Unaudited Pro Forma Condensed Combined Balance Sheet, a
total of $1,273.9 million was estimated to be repaid, comprising short-term debt of $116.3 million, accrued interest of $1.4 million and long-term debt of $1,156.3 million. Amounts outstanding under the various Existing PRA Indebtedness could
change between the date of the PRA balance sheet as of March 31, 2021 used for purposes of these unaudited pro forma condensed combined financial information and the Merger date. Accordingly, the amount of Existing PRA Indebtedness actually repaid
on the Merger Date could be different from the amount estimated to be repaid as of March 31, 2021.
The estimated preliminary purchase price is calculated as follows:
| Outstanding shares of PRA common stock as at March 31, 2021 (shares in millions) | 64.77 | |||
| Exchange ratio | 0.4125 | |||
| Shares of ICON to be issued (shares in millions) | 26.72 | |||
| Price per share as of May 31, 2021 | $ | 223.76 | ||
| Fair value of ICON ordinary shares to be issued ($'millions) | $ | 5,977.9 | ||
| Fair value of PRA equity awards exchanged for ICON equity awards ($'millions) | $ | 411.5 | ||
| Total equity consideration (including exchange of equity awards) ($'millions) | $ | 6,389.4 | ||
| Cash consideration to PRA stockholders ($'millions) | $ | 5,181.2 | ||
| Estimated repayment of PRA's debt as of March 31, 2021 ($'millions) | $ | 1,273.9 | ||
| Total cash consideration (including debt repayment) ($'millions) | $ | 6,455.1 | ||
| Merger consideration ($'millions) | $ | 12,844.5 |
An increase of 10% in the price of ICON ordinary shares would result in a $629.3 million increase in the estimated value of the consideration, and correspondingly, in the estimated value of
goodwill. A decrease of 10% in the price of ICON ordinary shares would result in a $629.3 million decrease in the estimated value of the consideration, and correspondingly, in the estimated value of goodwill.
3a. Cash consideration
The cash consideration to acquire PRA is estimated at $6,455.1 million. This represents the cash element of the total purchase price being $80.00 per share based on 64.77 million shares of PRA
common stock (other than Cancelled Shares, Dissenting Shares and Subsidiary-Held Shares) outstanding on March 31, 2021 and the estimated costs of $1,273.9 million associated with the repayment of PRA's debt (as adjusted for deferred financing fees
and accrued interest) as of March 31, 2021. The repayment of the Existing PRA Indebtedness also resulted in; (i) the unwinding of deferred financing fees of $2.5 million relating to the revolving credit facility, (ii) the unwinding deferred
financing fees of $3.6 million relating to the term loan, (iii) the recording of deferred tax associated with the unwinding of deferred financing fees of $1.6 million and (iv) settlement of accrued interest of $1.4 million.