Cynosure acquired by Hologic: fairness opinion by Leerink Partners
Announced February 14, 2017 · Tender offer · All cash ·
SC 14D9 filed February 22, 2017
Medical Devices and Supplies Medical Devices
Enterprise value
$1.7B
equity $1.6B
EV / LTM EBITDA
21.6x
EBITDA $77.0M · 15% margin
EV / LTM revenue
3.34x
revenue $497M
DCF discount rate
14.0%–16.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$66.00
Premium28.0%
Premium basisclosing price on February 13, 2017 (last trading day before announcement)
StructureTender offer
Termination fee$57.7M (3.5% of equity)
Reverse termination fee—
Go-shopNone
Outside date—
FilingSC 14D9 · EDGAR index
Implied value per share by method vs. $66.00 offer
Selected companies — EV / CY2017E Revenue $48.00 – $67.00
Selected companies — EV / CY2018E Revenue $46.00 – $67.00
Precedent transactions — Transaction Value / LTM Revenue $48.00 – $65.00
Precedent transactions — Transaction Value / NTM Revenue $48.00 – $67.00
Discounted cash flow $63.00 – $76.00
52-week intraday trading range $34.47 – $55.94
Wall Street analyst price targets $40.00 – $66.00
Premiums paid analysis $57.00 – $66.00
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Leerink Partners to the target board
Delivered February 14, 2017 · Fee $18.0M ($17.8M contingent on closing), $0.3M on delivery of the opinion
Discounted cash flow assumptions
Discount rate14.0%–16.0%
BasisCompany's weighted average cost of capital derived using the Capital Asset Pricing Model (levered and unlevered betas, historical equity risk premium, size premia, U.S. treasury yields)
Terminal valueExit multiple
Perpetuity growth—
Exit multiple11.0x–13.0x 2022 EBITDA grown by 10%
Projection periodQ2 FY2017-FY2022
Projections usedCompany management Forecasts
Implied value per share$63.00–$76.00
Discounted to present value as of March 31, 2017; adjusted for approximately $238 million of cash and cash equivalents and approximately $20 million of capital leases as of December 31, 2016.
Selected public companies (3)
ZELTIQ Aesthetics, Inc. · Syneron Medical Ltd · Cutera, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2017E Revenue | 0.8x | 1.8x | 5.0x | 2.0x–3.0x | $48.00–$67.00 |
| EV / CY2018E Revenue | 0.8x | 1.6x | 4.3x | 1.8x–2.8x | $46.00–$67.00 |
Selected precedent transactions (13)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2017-02-13 | ZELTIQ Aesthetics, Inc. | Allergan plc | 6.8x Transaction Value / LTM Revenue |
| 2016-01-04 | ThermiGen LLC | Almirall, S.A. | 2.7x Transaction Value / LTM Revenue |
| 2015-06-18 | Lumenis Ltd. | XIO Group | 1.6x Transaction Value / LTM Revenue |
| 2014-06-26 | Ulthera, Inc. | Merz, Inc. | 4.4x Transaction Value / LTM Revenue |
| 2013-12-16 | Solta Medical, Inc. | Valeant Pharmaceuticals International, Inc. | 2.0x Transaction Value / LTM Revenue |
| 2013-04-26 | Alma Lasers Ltd. | Fosun Pharma (Group) Ltd. | 2.3x Transaction Value / LTM Revenue |
| 2013-03-18 | Palomar Medical Technologies, Inc. | Cynosure, Inc. | 2.0x Transaction Value / LTM Revenue |
| 2012-11-08 | DUSA Pharmaceuticals, Inc. | Sun Pharmaceutical Industries Limited | 3.9x Transaction Value / LTM Revenue |
| 2009-09-09 | Candela Corporation | Syneron Medical Ltd. | 0.7x Transaction Value / LTM Revenue |
| 2008-07-07 | Reliant Technologies Inc. | Thermage, Inc. | 1.2x Transaction Value / LTM Revenue |
| 2001-02-25 | Coherent Medical Group | ESC Medical Systems Ltd. | 1.1x Transaction Value / LTM Revenue |
| 1997-11-11 | Laser Industries Limited | ESC Medical Systems Ltd. | 2.9x Transaction Value / LTM Revenue |
| 1997-02-19 | Luxar Corporation | ESC Medical Systems Ltd. | 3.0x Transaction Value / LTM Revenue |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Transaction Value / LTM Revenue | 0.7x | 2.3x | 6.8x | 2.3x–3.3x | $48.00–$65.00 |
| Transaction Value / NTM Revenue | 0.6x | 2.2x | 5.7x | 2.0x–3.0x | $48.00–$67.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-week intraday trading range | Low and high intraday stock prices during the 52-week period ended February 13, 2017 of approximately $34.47 to $55.94 per Share (informational only). | $34.47–$55.94 |
| Historical premium analysis | $66.00 represented a 28% premium to the 2/13/17 closing price, 45% to the 30-day VWAP as of 1/20/17, 44% to the 90-day VWAP, 42% to the one-year VWAP and an 18% premium to the highest 52-week intraday price. | — |
| Wall Street analyst price targets | Publicly available research analyst price targets ranged from $40 to $66 per Share as of February 13, 2017. | $40.00–$66.00 |
| Premiums paid analysis | Premiums paid in selected medical technology transactions over the last ten years; mean 37% and median 29%. Applied an illustrative 30%-50% premium range to the 1/20/17 closing price of $43.85. | $57.00–$66.00 |
Aggregate fee estimated at approximately $18 million, $250,000 paid upon rendering of the opinion and the remainder contingent upon consummation. Leerink received approximately $5.33 million in aggregate compensation from the Company since January 2011 for prior investment banking services.
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
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $594M | $707M | $778M | $888M | $1.0B | 14.0% |
| Revenue growth | 19.5% | 19.0% | 10.0% | 14.1% | 13.2% | |
| EBITDA | $94.0M | $118M | $137M | $179M | $207M | 21.8% |
| EBITDA growth | 22.1% | 25.5% | 16.1% | 30.7% | 15.6% | |
| EBITDA margin | 16% | 17% | 18% | 20% | 21% | |
| Implied EV / EBITDA | 17.7x | 14.1x | 12.1x | 9.3x | 8.0x |
Year-1 growth is against LTM at announcement ($497M revenue, $77.0M EBITDA); later years are year over year.
Leerink used the Company management "Forecasts," which covered standalone unlevered after-tax free cash flows from the second quarter of fiscal 2017 through fiscal 2022, plus estimated 2017 and 2018 revenue and LTM/NTM revenue figures. Terminal value was derived by growing 2022 EBITDA by 10% and applying 11.0x-13.0x EBITDA multiples. Management also estimated approximately $238 million of cash and cash equivalents and approximately $20 million of capital leases as of December 31, 2016. Specific revenue and EBITDA dollar amounts were not disclosed in the sections provided.
Process notes
Schedule 14D-9 for a cash tender offer at $66.00 per Share by Hologic (through a purchaser subsidiary). Leerink Partners LLC was the sole financial advisor and delivered its opinion to the Company Board on February 14, 2017. Termination fee of $57,715,052 was stated to be approximately 3.5% of the Company's equity value at the Offer Price (implying roughly $1.65 billion equity value). A $13 million retention cash pool was established, including retention payments of up to $8.5 million to CEO Michael Davin and up to $1.3 million to CFO Stephen Webber. ZELTIQ/Allergan was included as a precedent transaction announced the same day.
Other Medical Devices and Supplies fairness opinions
- NxStage Medical / Fresenius Medical Care AG & Co. KGaA 2017 · 29.7x EV/EBITDA
- Exactech / TPG 2017 · 15.0x EV/EBITDA
- Entellus Medical / StrykerCorp. 2017
- Spectranetics / Philips 2017
- Miramar Labs / Sientra 2017
- ZELTIQ Aesthetics / Allergan 2017 · 32.9x EV/EBITDA
All Medical Devices and Supplies opinions → · Leerink Partners opinions