UDG Healthcare buys STEM Marketing for up to £84m

UDG Healthcare has acquired STEM Marketing, a provider of commercial, marketing and medical audits to pharmaceutical companies, for up to £84m in a deal that is expected to be immediately accretive to earnings.

The FTSE 250 provider of healthcare services said STEM is a highly cash-generative, high-margin business with strong growth in recent years.

It said the deal – which is in line with its strategy to growth both organically and through acquisitions with a focus on high-growth area – significantly expands Ashfield's service offering and capabilities in the commercial and clinical services market and complements Ashfield Healthcare Communications’ global offering.

For the year ending 31 December 2015, STEM had gross assets of £13.5m and generated earnings before interest, taxes, depreciation and amortisation of £5.5m.

The acquisition will be financed from existing cash facilities and is expected to deliver a return on capital employed in excess of the group's target of 15% within three years.

Chief executive Brendan McAtamney said: “STEM is an excellent strategic fit for UDG and is wholly aligned with our global growth strategy of expanding our market leading positions providing services to the pharmaceutical sector. The acquisition of STEM, a business with an established global footprint and strong growth opportunities, will enable us to provide new services to our clients, which are highly complementary to those already delivered by our Ashfield business.

“We place great emphasis on cultural fit when looking at potential acquisition opportunities and STEM comes with an excellent management team, which will become an important part of our client offering and the wider UDG Healthcare Group."

At 1117 BST, the shares were up 0.9% to 660.50p.