Corgenix Medical acquired by Orgentec Diagnostika: fairness opinion by Inverness Advisors
Announced August 27, 2014 · One-step merger · All cash ·
DEFM14A filed October 21, 2014
Enterprise value
$16.0M
EV / LTM EBITDA
8.4x
EBITDA $1.9M · 12% margin
EV / LTM revenue
1.00x
revenue $16.0M
DCF discount rate
15.0%–20.0%
Perpetuity growth and exit multiple
Deal terms
ConsiderationAll cash
Price per share$0.27
Premium27.2%
Premium basispremium of proposed transaction per Inverness premiums paid analysis, relative to price one month prior to March 11, 2014 (announcement of exploration of strategic alternatives)
StructureOne-step merger
Termination fee$0.3M (2.0% of equity)
Reverse termination fee$0.6M
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $0.27 offer
Selected companies — EV / LTM Revenue $0.25 – $0.40
Selected companies — EV / CY2014E Revenue $0.25 – $0.48
Selected companies — EV / CY2015E Revenue $0.26 – $0.52
Selected companies — EV / LTM EBITDA $0.16 – $0.23
Selected companies — EV / CY2014E EBITDA $0.17 – $0.21
Selected companies — EV / CY2015E EBITDA $0.23 – $0.29
Selected companies — LTM P/E $0.11 – $0.20
Selected companies — CY2014E P/E $0.17 – $0.27
Selected companies — CY2015E P/E $0.29 – $0.49
Precedent transactions — EV / LTM Revenue (target EV < $150 million) $0.28 – $0.82
Precedent transactions — EV / LTM EBITDA (target EV < $150 million) $0.23 – $0.36
Precedent transactions — EV / LTM Revenue (target EV > $150 million) $0.50 – $0.98
Precedent transactions — EV / LTM EBITDA (target EV > $150 million) $0.21 – $0.32
Discounted cash flow $0.25 – $0.51
Premiums Paid Analysis $0.19 – $0.38
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Inverness Advisors to the target board
Delivered August 26, 2014 · Fee $0.5M ($0.3M contingent on closing), $0.2M on delivery of the opinion
Discounted cash flow assumptions
Discount rate15.0%–20.0%
BasisCorgenix's weighted average cost of capital
Terminal valuePerpetuity growth and exit multiple
Perpetuity growth2.0%–3.0%
Exit multiple7.0x–9.0x FY2018E EBITDA
Projection periodFY2015-FY2018
Projections usedCorgenix management Forecasts
Implied value per share$0.25–$0.51
Two DCFs: terminal multiple method implied $0.38-$0.51 per share; perpetuity growth method implied $0.25-$0.35 per share. Cash flows discounted to July 1, 2014; net cash added; fully diluted shares via treasury stock method.
Selected public companies (15)
BG Medicine, Inc. · Biomerica Inc. · Bio-Rad Laboratories, Inc. · Bio-Reference Laboratories Inc. · Chembio Diagnostics, Inc. · diaDexus, Inc. · Enzo Biochem Inc. · ERBA Diagnostics, Inc. · Heska Corporation · Laboratory Corporation of America Holdings · Miraca Holdings Inc. · Neogenomics Inc. · Omega Diagnostics Group PLC · Quest Diagnostics Inc. · Transgenomic Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | — | — | — | 1.1x–2.1x | $0.25–$0.40 |
| EV / CY2014E Revenue | — | — | — | 1.1x–2.4x | $0.25–$0.48 |
| EV / CY2015E Revenue | — | — | — | 1.0x–2.3x | $0.26–$0.52 |
| EV / LTM EBITDA | — | — | — | 7.9x–13.7x | $0.16–$0.23 |
| EV / CY2014E EBITDA | — | — | — | 7.7x–9.7x | $0.17–$0.21 |
| EV / CY2015E EBITDA | — | — | — | 6.7x–9.2x | $0.23–$0.29 |
| LTM P/E | — | — | — | 15.8x–30.1x | $0.11–$0.20 |
| CY2014E P/E | — | — | — | 16.0x–27.2x | $0.17–$0.27 |
| CY2015E P/E | — | — | — | 13.3x–23.7x | $0.29–$0.49 |
Selected precedent transactions (31)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2014-03-20 | DiaSpect Medical AB | EKF Diagnostics Holdings plc | — |
| 2014-03-20 | Selah Genomics Inc | EKF Diagnostics Holdings plc | — |
| 2014-01-07 | Alverix, Inc. | Becton, Dickinson and Company | — |
| 2013-10-22 | PLUS Diagnostics, Inc. | Miraca Life Sciences, Inc. | — |
| 2013-07-30 | Immco Diagnostics, Inc. | Trinity Biotech plc | — |
| 2013-05-06 | Biohelix Corporation | Quidel Corp. | — |
| 2013-01-03 | Hologic, Inc. LIFECODES Business | Immucor Inc. | — |
| 2012-12-16 | MorphoSys's AbD Serotec Research Reagent & Diagnostic Business | Bio-Rad Loboratories, Inc. | — |
| 2012-09-17 | Complete Genomics, Inc. | BGI | — |
| 2012-08-06 | Cardiocore Lab, Inc. | CardioNet, Inc. | — |
| 2012-07-09 | GenturaDx-USA, Inc. | Luminex Corporation | — |
| 2012-03-01 | Fiomi Diagnostics AB | Trinity Biotech plc | — |
| 2012-02-13 | SeraCare Life Sciences, Inc. | Linden LLC | — |
| 2011-12-02 | Verum Diagnostica GmbH | Roche Holdings AG | — |
| 2011-10-13 | Claros Diagnostics, Inc. | Opko Health, Inc. | — |
| 2014-06-17 | ProteinSimple | Techne Corp. | — |
| 2014-04-07 | Iquum, Inc. | Roche Molecular Systems, Inc. | — |
| 2014-02-04 | Crescendo Bioscience, Inc. | Myriad Genetics Inc. | — |
| 2014-01-22 | Solstas Lab Partners Group, LLC | Quest Diagnostics Inc. | — |
| 2014-01-16 | Ortho-Clinical Diagnostics, Inc. | The Carlyle Group LP | — |
| 2013-11-11 | Novartis Vaccines & Diagnostics, Inc., Blood Transfusion Diagnostics Unit | Grifols, S.A. | — |
| 2013-09-03 | BioFire Diagnostics, Inc. | bioMérieux SA | — |
| 2013-04-15 | Life Technologies Corporation | Thermo Fisher Scientific, Inc. | — |
| 2013-02-24 | HemoCue AB | Radiometer Medical ApS | — |
| 2013-01-07 | Verinata Health, Inc. | Illumina Inc. | — |
| 2012-09-17 | IRIS International Inc. | Beckman Coulter, Inc. | — |
| 2012-07-16 | One Lambda, Inc. | Thermo Fisher Scientific, Inc. | — |
| 2012-06-04 | MEDTOX Scientific Inc. | Laboratory Corp. of America Holdings | — |
| 2012-05-17 | Dako A/S | Agilent Technologies Inc. | — |
| 2012-04-30 | Gen-Probe Inc. | Hologic Inc. | — |
| 2011-10-06 | Caris Life Sciences, Inc., Anatomic Pathology Business | Miraca Holdings Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue (target EV < $150 million) | — | — | — | 1.3x–4.8x | $0.28–$0.82 |
| EV / LTM EBITDA (target EV < $150 million) | — | — | — | 13.4x–25.1x | $0.23–$0.36 |
| EV / LTM Revenue (target EV > $150 million) | — | — | — | 2.8x–5.8x | $0.50–$0.98 |
| EV / LTM EBITDA (target EV > $150 million) | — | — | — | 12.0x–21.0x | $0.21–$0.32 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Premiums Paid Analysis | Eleven all-cash acquisitions of North America-based public healthcare companies with transaction values between $5 million and $50 million closed between 8/22/2011 and 8/22/2014; 1st-3rd quartile one-month premium range of (11.7%) to 78.6% applied to Corgenix's stock price one month prior to March 11, 2014; implied premium of the proposed transaction was 27.2%. | $0.19–$0.38 |
Total fee of $546,000; $60,000 retainer already paid, $200,000 payable upon delivery of the fairness opinion, balance contingent upon consummation of the transaction. Expense reimbursement and indemnification also provided.
3,000+ healthcare deal-level valuation multiples
The Valuation database includes financial details for more than 3,000 healthcare M&A transactions, private and public, with deal-level multiples, categorized by segment, type, and year.
Management projections
Inverness used the "Forecasts" prepared and furnished by Corgenix management, covering fiscal years 2015 through 2018 (fiscal year ending June 30), to compute projected unlevered free cash flow for its discounted cash flow analyses, with FY2018 EBITDA and FY2018 free cash flow used for terminal value. The filing sections provided do not disclose specific revenue or EBITDA figures from the Forecasts.
Process notes
Single financial advisor (Inverness Advisors) delivered an oral opinion on August 26, 2014, confirmed in writing, to the Corgenix board. Deal followed a public exploration of strategic alternatives announced March 11, 2014 and a competitive process involving other bidders (including "Target E"); Orgentec/Water Street raised its offer to $0.27 per share as a "best and final" offer and reduced its proposed termination fee from 3% to 2% of aggregate consideration. Termination fee of $324,000 (~2% of implied equity value) plus expense reimbursement up to $400,000; reverse termination fee of $648,000 plus expenses up to $400,000. Note the merger consideration implied multiples (e.g., 17.1x LTM EBITDA, 1.3x LTM Revenue) exceeded several selected-company reference ranges.
Other Diagnostics / Life Sciences fairness opinions
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
- Pall / Danaher 2015 · 20.5x EV/EBITDA
- Bio-Reference Laboratories / Opko Health 2015 · 12.1x EV/EBITDA
- FEI / Thermo Fisher Scientific 2016 · 15.1x EV/EBITDA
- Sequenom / Laboratory Corporation of America 2016
- Gen-Probe / Hologic 2012 · 16.1x EV/EBITDA
All Diagnostics / Life Sciences opinions → · Inverness Advisors opinions