Bio-Reference Laboratories acquired by Opko Health: fairness opinion by Allen
Deal terms
Each share of Bio-Reference common stock converted into the right to receive 2.75 shares of OPKO common stock (fixed exchange ratio, rounded up to nearest whole number). Based on OPKO's June 3, 2015 closing price of $19.12, implied $52.58 per Bio-Reference share; based on the July 14, 2015 closing price of $16.74, implied $46.04 per share. Allen & Company used an implied per share merger consideration of $50.35 based on OPKO's June 1, 2015 closing price of $18.31.
Implied value per share by method vs. $52.58 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Allen to the target board
Discounted cash flow assumptions
Standalone unlevered after-tax free cash flows discounted to present value as of June 30, 2015; stock-based compensation treated as a non-cash expense. Implied per-share reference range not shown in the provided excerpt (text truncated).
Selected public companies (3)
Laboratory Corporation of America Holdings · Quest Diagnostics Incorporated · Sonic Healthcare Limited
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Firm Value / CY2015E EBITDA | 9.4x | 10.6x | 12.2x | 8.0x–9.0x | $34.41–$38.86 |
| Firm Value / CY2016E EBITDA | 9.0x | 9.6x | 11.2x | 7.0x–8.0x | $35.65–$40.91 |
Selected precedent transactions (10)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2014-01-22 | Solstas Lab Partners Group | Quest Diagnostics Inc. | — |
| 2013-10-22 | PLUS Diagnostics Inc. | Miraca Life Services, Inc. | — |
| 2012-06-04 | MEDTOX Scientific, Inc. | Laboratory Corporation of America Holdings | — |
| 2011-04-06 | Orchid Cellmark Inc. | Laboratory Corporation of America Holdings | — |
| 2011-03-18 | Celera Corporation | Quest Diagnostics Inc. | — |
| 2011-02-24 | Athena Diagnostics, Inc. | Quest Diagnostics Inc. | — |
| 2011-01-24 | Genoptix, Inc. | Novartis AG | — |
| 2010-11-08 | CBLPath, Inc. | Sonic Healthcare Ltd. | — |
| 2010-10-22 | Clarient Diagnostics Services, Inc. | General Electric Company (GE Healthcare) | — |
| 2010-09-13 | Genzyme Genetics Corp. | Laboratory Corporation of America Holdings | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Firm Value / LTM EBITDA (LTM as of January 31, 2015) | 6.1x | 8.6x | 15.0x | 9.0x–10.0x | $36.05–$40.18 |
| Firm Value / NTM EBITDA (applied to CY2015E EBITDA) | 6.4x | 10.9x | 14.0x | 8.0x–9.0x | $34.41–$38.86 |
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | CAGR |
|---|---|---|---|---|
| Revenue | $1.0B | $1.1B | $1.2B | 11.1% |
| Revenue growth | 9.0% | 11.8% | 10.5% | |
| EBITDA | $142M | $175M | $211M | 22.1% |
| EBITDA growth | 17.0% | 23.4% | 20.9% | |
| EBITDA margin | 14% | 15% | 17% | |
| Implied EV / EBITDA | 10.4x | 8.4x | 7.0x |
Year-1 growth is against LTM at announcement ($927M revenue, $121M EBITDA); later years are year over year.
Allen & Company used internal financial forecasts and other estimates of Bio-Reference management (covering the remaining four-month period of the fiscal year ending October 31, 2015 through the full fiscal year ending October 31, 2018) for the DCF, and Bio-Reference management estimates of LTM (as of January 31, 2015), CY2015E and CY2016E EBITDA for the multiples analyses. Forecasts and other financial and operating data relating to OPKO were provided by OPKO management. Specific revenue and EBITDA dollar figures were not disclosed in the provided sections.
Process notes
Other Diagnostics / Life Sciences fairness opinions
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
- Pall / Danaher 2015 · 20.5x EV/EBITDA
- FEI / Thermo Fisher Scientific 2016 · 15.1x EV/EBITDA
- Sequenom / Laboratory Corporation of America 2016
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Advanced Accelerator Applications / Novartis 2017