Days before PPD‘s (NYSE:PPDI) $3.9 billion sale to private equity was announced on October 3, the clinical research organization’s lead independent director, Ernest Mario, was busy trading e-mails and phone calls with The Carlyle Group in an effort to improve what had become a substantially reduced offer.

Carlyle and Hellman & Friedman, the other private equity firm joining in the offer, had settled on $33 per share, a price that valued the Wilmington-based company at about $3.8 billion. The offer was well below PPD’s 2008 stock peak of more than $47 per share. It was below the $37.50 per share high bid that Carlyle had previously offered. It was also lower than the range of values calculated by two financial advisory firms hired by the CRO.

But David Rubenstein, a founder of Carlyle, was firm. Carlyle and H&F would not consider increasing the price until PPD’s board formally considered the offer and responded in writing. PPD’s board countered, seeking $34 a share. Carlyle and H&F would go only as high as $33.25

In securities filings, PPD said board discussions that week touched on the sensitivity of PPD’s share price in the weak economy, reduced R&D spending by pharmaceutical companies and Mario’s belief from his discussions with Rubenstein that the private equity firms would not budge on price. PPD’s board relented, opting to move forward with a sale for $33.25 per share.

The $33.25 price is a nearly 30 percent premium to PPD’s closing stock price before the $3.9 billion sale was announced. But it’s in the same range as another private equity offer that Mario received months before, according to securities filings. The unnamed private equity firm offered between $33 and $34 per share and insisted on exclusivity in negotiations.

After the unsolicited bid, PPD’s board decided to explore a sale of the company. These discussions would encompass only private equity, no competitor CROs. In light of the unsolicited bidder’s price and insistence on exclusivity, the unnamed firm would not be among the potential buyers contacted. In doing so, PPD made a gambit it could get a better deal.

It almost did.

PPD had spoken to private equity about a potential sale before. In filings, the company disclosed it talked with Carlyle twice in 2009 and with H&F on four occasions – three times in 2009 and once in April of this year. None of those talks progressed to offers.

By late July, PPD had four private equity bidders. H&F offered $33 to $36 per share. Carlyle’s $37.25 offer topped them all. On July 26, Carlyle said it would bump its offer to $37.50 per share if Carlyle could negotiate exclusively. But just a month later, Carlyle’s circumstances changed.

In August, the S&P 500 declined by 8 percent and an index of publicly-traded CROs tumbled by 18 percent. PPD also noted that concerns over raising the U.S. debt ceiling, the downgrading of the U.S. credit rating, and the European debt crisis had buffeted the global economy. On August 25 Carlyle trimmed its offer to $34 per share, citing difficulty securing financing. A $35 per share offer was possible only if Carlyle joined with an equity partner.

PPD’s board agreed to consider a joint Carlyle-H&F bid of at least $35 per share. The deal also had to be signed and announced on September 12. The private equity firms agreed. But H&F needed more time to finish its financial analysis. That analysis only trimmed the offer yet again. On the evening of September 26, Carlyle and H&F finally communicated their revised offer: $33 per share.

“Over the next day and a half,” PPD said in filings, “Dr. Mario exchanged e-mails and phone calls with David Rubenstein … in which Dr. Mario expressed the Company’s dissatisfaction with the price.”

There’s a slim chance another bidder could eclipse the $33.25 offer that was ultimately reached. The sale agreement includes a “go shop” provision that allows PPD to consider higher bids if submitted within 30 days of the October 2 merger agreement. Morgan Stanley has contacted a total of 22 parties: nine companies and 13 financial entities. Those parties include competitor CROs that were previously excluded from the initial bidding.

Through October 13, just one unnamed party has entered into a confidentiality agreement with PPD similar to the confidentiality agreements Carlyle and H&F signed to participate in the bidding process. That entity has until November 1 to determine if it has the means and the desire to top the Carlyle and H&F joint bid.

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