Abaxis acquired by Zoetis: fairness opinion by Piper Sandler
Announced May 16, 2018 · One-step merger · All cash ·
DEFM14A filed June 27, 2018
Diagnostics / Life Sciences Diagnostic Tools
Enterprise value
$1.9B
equity $2.0B
EV / LTM EBITDA
41.3x
EBITDA $46.0M · 19% margin
EV / LTM revenue
7.75x
revenue $245M
DCF discount rate
11.8%–13.8%
Deal terms
ConsiderationAll cash
Price per share$83.00
Premium15.0%
Premium basisClosing price of $72.17 on May 14, 2018 (last trading day analyzed by Piper Jaffray); stock closed at $71.75 on May 15, 2018, the last full trading day prior to announcement
StructureOne-step merger
Termination fee$70.0M (3.5% of equity)
Reverse termination fee$60.0M
Go-shopNone
Outside dateNovember 15, 2018
FilingDEFM14A · EDGAR index
Opinion of Piper Sandler to the target board
Delivered May 15, 2018
Discounted cash flow assumptions
Discount rate—
BasisWACC
Terminal value—
Perpetuity growth—
Exit multiple—
Projection period—
Projections usedMay 2018 forecasts prepared by Abaxis management
Implied value per share—
Piper Jaffray conducted a discounted cash flow analysis on Abaxis based on May 2018 forecasts prepared by Abaxis management; the sliced text does not include the resulting implied per-share range or assumptions.
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Analysis | Reviewed historical closing prices and trading volumes for Abaxis common stock over the one-year period ended May 14, 2018. Merger consideration premiums: 15.0% to the $72.17 May 14, 2018 close; 17.2% to the 1-day prior VWAP of $70.83; 20.1% to the 1-week prior VWAP of $69.09; 19.2% to the 4-week prior VWAP of $69.64; 5.7% to the 52-week high of $78.53 (January 29, 2018); and 90.1% to the 52-week low of $43.66 (September 9, 2017). | $43.66–$78.53 |
| Selected Public Companies Analysis | Piper Jaffray compared the financial performance of Abaxis with that of certain other publicly-traded companies it deemed relevant; the company names, multiples and implied values are not included in the sliced text. | — |
| Selected Transactions Analysis | Piper Jaffray reviewed the financial terms, to the extent publicly available, of certain business combination transactions it deemed relevant; the transaction names, multiples and implied values are not included in the sliced text. | — |
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $293M | $328M | $371M | $411M | $449M | 11.3% |
| Revenue growth | 19.6% | 11.9% | 13.1% | 10.8% | 9.2% | |
| EBITDA | $54.0M | $70.0M | $86.0M | $101M | $117M | 21.3% |
| EBITDA growth | 17.4% | 29.6% | 22.9% | 17.4% | 15.8% | |
| EBITDA margin | 18% | 21% | 23% | 25% | 26% | |
| Implied EV / EBITDA | 35.1x | 27.1x | 22.1x | 18.8x | 16.2x |
Year-1 growth is against LTM at announcement ($245M revenue, $46.0M EBITDA); later years are year over year.
Piper Jaffray's discounted cash flow analysis was based on May 2018 financial forecasts prepared by Abaxis management, described in the proxy under "Certain Financial Forecasts Utilized by Abaxis in Connection with the Merger." The specific projection years and revenue/EBITDA figures are not included in the sections provided.
Process notes
Single financial advisor (Piper Jaffray & Co.) delivered a written fairness opinion to the Abaxis board on May 15, 2018; no special committee. Deal structured under California law with dissenters' rights (Chapter 13 CCC). Two-tiered reverse termination fee payable by Zoetis: $60 million (approx. 3%) if regulatory approvals are not obtained and Zoetis does not extend the outside date, or $120 million (approx. 6%) if Zoetis extends the outside date to May 15, 2019 and approvals are not obtained. Abaxis termination fee of $70 million represents approximately 3.5% of equity value (implying equity value of roughly $2.0 billion). Outside date November 15, 2018, extendable by Zoetis to May 15, 2019. A putative class action was filed June 14, 2018 in California Superior Court (Contra Costa County). Note: the proxy refers to the Piper Jaffray opinion as both Annex B and Annex C in different places. Piper Jaffray's EV calculation used debt of approximately $277,000 and cash of approximately $186.0 million as of May 11, 2018. Detailed comparable company, precedent transaction and DCF output tables were not included in the sliced sections.
Other Diagnostics / Life Sciences fairness opinions
- Genomic Health / Exact Sciences 2019 · 32.2x EV/EBITDA
- Advanced Accelerator Applications / Novartis 2017
- Alere / Abbott Laboratories 2017 · 14.3x EV/EBITDA
- VWR / Avantor 2017 · 12.6x EV/EBITDA
- FEI / Thermo Fisher Scientific 2016 · 15.1x EV/EBITDA
- Sequenom / Laboratory Corporation of America 2016
All Diagnostics / Life Sciences opinions → · Piper Sandler opinions