Beckman Coulter acquired by Danaher: fairness opinion by Goldman Sachs
Announced February 7, 2011 · Tender offer · All cash ·
SC 14D9 filed February 15, 2011
Diagnostics / Life Sciences Diagnostic Tools
Enterprise value
$6.8B
EV / LTM EBITDA
8.4x
EBITDA $806M · 22% margin
EV / LTM revenue
1.86x
revenue $3.7B
DCF discount rate
7.0%–9.0%
Perpetuity growth
Deal terms
ConsiderationAll cash
Price per share$83.50
Premium11.1%
Premium basisclosing price of $75.17 per share on February 4, 2011; premium to the undisturbed closing price of $57.09 on December 9, 2010 was 46.3%
StructureTender offer
Termination fee$165M
Reverse termination fee—
Go-shopNone
Outside date—
FilingSC 14D9 · EDGAR index
Implied value per share by method vs. $83.50 offer
Discounted cash flow $62.20 – $115.80
Illustrative Present Value of Future Share Price Analysis $64.30 – $79.18
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Delivered February 6, 2011 · Fee $32.0M
Discounted cash flow assumptions
Discount rate7.0%–9.0%
Basisestimates of Beckman Coulter's weighted average cost of capital
Terminal valuePerpetuity growth
Perpetuity growth1.0%–3.0%
Exit multiple—
Projection period2011-2015
Projections usedFinancial Forecasts (Beckman Coulter management)
Implied value per share$62.20–$115.80
Free cash flows discounted to January 1, 2011 using a mid-year convention.
Selected public companies (13)
Alere Inc. · BioMerieux S.A. · Bio-Rad Laboratories, Inc. · Gen-Probe Incorporated · Hologic, Inc. · Immucor, Inc. · Miraca Holdings Inc. · Qiagen N.V. · Sysmex Corporation · Bruker Corporation · Mettler-Toledo International Inc. · PerkinElmer, Inc. · Tecan Group Ltd.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (Diagnostics companies) | 5.2x | 10.9x | 16.2x | — | — |
| EV / LTM EBITDA (Life Sciences companies) | 10.8x | 12.9x | 15.1x | — | — |
| EV / CY2010E EBITDA (Diagnostics companies) | 5.2x | 10.6x | 16.0x | — | — |
| EV / CY2010E EBITDA (Life Sciences companies) | 11.1x | 13.1x | 14.8x | — | — |
| EV / CY2011E EBITDA (Diagnostics companies) | 5.0x | 9.2x | 14.5x | — | — |
| EV / CY2011E EBITDA (Life Sciences companies) | 9.9x | 11.3x | 13.5x | — | — |
| EV / LTM EBIT (Diagnostics companies) | 7.8x | 12.4x | 21.4x | — | — |
| EV / LTM EBIT (Life Sciences companies) | 12.3x | 16.5x | 18.7x | — | — |
| EV / CY2010E EBIT (Diagnostics companies) | 7.6x | 12.6x | 20.6x | — | — |
| EV / CY2010E EBIT (Life Sciences companies) | 13.9x | 15.3x | 16.9x | — | — |
| EV / CY2011E EBIT (Diagnostics companies) | 7.2x | 12.1x | 18.0x | — | — |
| EV / CY2011E EBIT (Life Sciences companies) | 12.5x | 13.0x | 15.4x | — | — |
| P / CY2011E EPS (Diagnostics companies) | 14.2x | 17.4x | 26.7x | — | — |
| P / CY2011E EPS (Life Sciences companies) | 16.7x | 18.6x | 20.3x | — | — |
| P / CY2012E EPS (Diagnostics companies) | 12.8x | 15.9x | 23.2x | — | — |
| P / CY2012E EPS (Life Sciences companies) | 14.3x | 15.8x | 17.9x | — | — |
Selected precedent transactions (12)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2009 | Varian, Inc. | Agilent Technologies Inc. | — |
| 2009 | Olympus Corporation (diagnostics systems business) | Beckman Coulter | — |
| 2008 | Applied Biosystems, Inc. | Invitrogen Corporation | — |
| 2007 | Dade Behring Holdings Inc. | Siemens AG | — |
| 2007 | New Brunswick Scientific Co. | Eppendorf Group | — |
| 2007 | Molecular Devices Corporation | MDS Inc. | — |
| 2007 | Abbott Diagnostics (withdrawn) | GE Healthcare | — |
| 2006 | Phadia AB | Cinven | — |
| 2006 | Bayer Diagnostics | Siemens AG | — |
| 2006 | Biacore International AB | GE Healthcare Life Sciences | — |
| 2006 | Diagnostic Products Corporation | Siemens AG | — |
| 2005 | Kendro Laboratory Products (subsidiary of SPX Corporation) | Thermo Electron Corporation | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Sales | 1.4x | 3.0x | 4.8x | — | — |
| EV / LTM EBITDA | 10.8x | 14.3x | 18.9x | — | — |
| EV / LTM EBIT | 12.6x | 19.9x | 35.6x | — | — |
| Premium of transaction LTM EBIT multiple to sector median multiple | -0.1x | 0.0x | 1.0x | — | — |
| Premium paid, 1 day prior | 0.2x | 0.3x | 0.5x | — | — |
| Premium paid, 4 weeks prior | 0.1x | 0.5x | 0.7x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading Analysis | Offer price of $83.50 represented an 11.1% premium to the $75.17 closing price on February 4, 2011; a 46.3% premium to the $57.09 closing price on December 9, 2010 (the Undisturbed Date); a 50.0% premium to the $55.65 closing price on November 12, 2010 (four weeks prior to the Undisturbed Date); and a 6.7% premium to the 52-week high intraday price of $78.27. | — |
| Illustrative Present Value of Future Share Price Analysis | Applied forward P/E multiples of 14.0x to 15.8x to CY2013-CY2015 EPS estimates from the Financial Forecasts to derive implied per share values as of February 2012, 2013 and 2014, discounted at an 8.0% cost of equity. | $64.30–$79.18 |
| Premia Paid Analysis | Median one-day and four-week premia for announced and completed all-cash U.S. majority-acquisition transactions with enterprise values of $1-10 billion since 2006: 2006 22.2%/27.1%; 2007 20.5%/23.2%; 2008 41.7%/34.1%; 2009 32.7%/39.7%; 2010 40.1%/41.4%. Proposed transaction premium to Undisturbed Closing Price: 46.3% one-day and 50.0% four-week. | — |
Transaction fee of approximately $32 million, the principal portion of which is contingent upon consummation of the Offer; plus expense reimbursement and indemnification. Engagement letter dated December 14, 2007, supplemented January 7, 2011.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $3.9B | $4.2B | $4.5B | $4.9B | $5.3B | 8.0% |
| Revenue growth | 6.9% | 7.6% | 7.9% | 8.2% | 8.3% | |
| EBITDA | $823M | $862M | $918M | $987M | $1.1B | 6.7% |
| EBITDA growth | 2.1% | 4.7% | 6.5% | 7.5% | 8.1% | |
| EBITDA margin | 21% | 20% | 20% | 20% | 20% | |
| Implied EV / EBITDA | 8.3x | 7.9x | 7.4x | 6.9x | 6.4x |
Year-1 growth is against LTM at announcement ($3.7B revenue, $806M EBITDA); later years are year over year.
Goldman Sachs used the "Financial Forecasts" prepared by Beckman Coulter management, covering calendar years 2011 through 2015, in its discounted cash flow analysis and calendar years 2013 through 2015 EPS in its present value of future share price analysis. No revenue or EBITDA figures from the forecasts are disclosed in the sliced sections.
Process notes
Schedule 14D-9 for a cash tender offer. Single fairness opinion from Goldman Sachs to the Beckman Coulter board, rendered orally February 6, 2011 and confirmed in writing. Competitive process with multiple potential purchasers; board chose Danaher's nominally lower $83.00 (plus $0.19 dividend) bid over a higher nominal bid due to closing certainty, lower breakup fee, more favorable MAE definition and tender offer structure, then negotiated an additional $0.50 per share. Goldman Sachs had previously provided investment banking services to both Beckman Coulter and Danaher.
Other Diagnostics / Life Sciences fairness opinions
- Genoptix / Novartis AG 2011 · 11.0x EV/EBITDA
- Gen-Probe / Hologic 2012 · 16.1x EV/EBITDA
- MEDTOX Scientific / Laboratory Corporation of America 2012 · 12.7x EV/EBITDA
- Dionex / Thermo Fisher Scientific 2010 · 17.8x EV/EBITDA
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
All Diagnostics / Life Sciences opinions → · Goldman Sachs opinions