Shares of PRA Health Sciences (PRAH), a contract research organization (CRO), are jumping on Wednesday and were up by 18.2% as of 1:27 p.m. EST. There are two reasons investors are bidding up PRA Health Sciences' stock today. First, the company reported better-than-expected fourth-quarter 2020 revenue and earnings. Second, Icon Plc (ICLR -2.81%), a CRO headquartered in Ireland, announced a deal to acquire PRA Health Sciences.
During the fourth quarter, PRA Health Sciences reported revenue of $873.5 million, representing a 9.1% year-over-year increase. The company's top line came in above the $829.02 million analysts were expecting. PRA Health Sciences' adjusted net income of $101.2 million -- or $1.55 on a per-share basis -- was also better than the adjusted net income of $98.7 million and adjusted earnings per share (EPS) of $1.54 it recorded during the fourth quarter of the fiscal year 2019.
On average, analysts expected the company's adjusted EPS to be $1.47. Meanwhile, Icon's proposed acquisition of PRA Health Sciences is valued at about $12 billion, which represents a 30% premium over PRA Health Sciences' stock price as of the close of trading on Feb. 23. Per the terms of the agreement, each of PRA Health Sciences' shareholders will receive $80 in cash and 0.4125 shares of Icon for each share of PRA Health Sciences owned. Icon's shareholders will own about 66% of the merged entity.
While PRA Health Sciences' stock is getting a boost as a result of today's news, Icon's stock is going in the opposite direction, dropping by as much as 11.3% today. And that's despite the healthcare company also reporting revenue and earnings that topped the consensus analyst estimates. Investors are likely not thrilled that Icon is paying a hefty premium for its acquisition of PRA Health Sciences.