Derma Sciences acquired by Integra Lifesciences: fairness opinion by Greenhill
Deal terms
Implied value per share by method vs. $7.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Greenhill to the target board
Discounted cash flow assumptions
Base Case: $3.70-$5.85 per share; Investment Case: $5.71-$8.52 per share. Present values as of December 31, 2016 using mid-year convention.
Selected public companies (5)
MiMedx Group, Inc. · Anika Therapeutics, Inc. · Advanced Medical Solutions Group plc · Tissue Regenix Group plc · Alliqua BioMedical, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2016E Revenue | 1.2x | 4.7x | 6.3x | — | — |
| EV / 2017E Revenue | 0.8x | 5.1x | 17.0x | 1.0x–1.3x | $3.75–$4.70 |
| EV / 2018E Revenue | 0.5x | 4.7x | 6.9x | — | — |
Selected precedent transactions (20)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2016-12 | Acelity L.P. (LifeCell Corporation) | Allergan plc | — |
| 2016-10 | Soluble Systems, LLC | Alliqua Biomedical, Inc. | — |
| 2016-07 | BioD, LLC | The Company (Derma Sciences, Inc.) | — |
| 2016-05 | EuroMed, Inc. | Scapa Group plc | — |
| 2016-01 | Stability Inc. | MiMedx Group, Inc. | — |
| 2015-06 | TEI Biosciences Inc. and TEI Medical Inc. | Integra LifeSciences Holdings Corporation | — |
| 2015-02 | Celleration, Inc. | Alliqua Biomedical, Inc. | — |
| 2014-10 | Transplant Technologies of Texas, Ltd. | Globus Medical, Inc. | — |
| 2014-05 | Choice Therapeutics, Inc. | Alliqua Biomedical, Inc. | — |
| 2014-01 | Shire plc (Dermagraft assets) | Organogenesis Inc. | — |
| 2013-07 | Systagenix Wound Management Limited | Kinetic Concepts, Inc. | — |
| 2013-06 | Pioneer Surgical Technology, Inc. | RTI Biologics Inc. | — |
| 2012-11 | Healthpoint Biotherapeutics Ltd. | Smith & Nephew plc | — |
| 2012-06 | BSN Medical GmbH | EQT Partners AB | — |
| 2012-05 | Kensey Nash Corporation | Koninklijke DSM N.V. | — |
| 2012-03 | MedEfficiency, Inc. | The Company (Derma Sciences, Inc.) | — |
| 2012-02 | Aldagen, Inc. | Cytomedix, Inc. | — |
| 2012-12 | Synovis Life Technologies, Inc. | Baxter International Inc. | — |
| 2011-05 | Advanced BioHealing Inc. | Shire plc | — |
| 2011-05 | Orthovita, Inc. | Stryker Corporation | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 1.4x | 3.4x | 6.4x | 2.0x–2.5x | $5.57–$6.75 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Sum-of-the-Parts Analysis | Separate EV/2017E revenue multiples of 1.00x-1.50x applied to advanced wound care revenue and 0.25x-0.75x to traditional wound care revenue (Company Base Case Forecasts), plus cash, Comvita investment and notes receivable, less preferred stock value and BioD product payment/earnouts. | $3.13–$5.04 |
| Premiums Paid - one day | 40%-55% premium reference range applied to $5.00 closing price on January 9, 2017. | $7.00–$7.75 |
| Premiums Paid - one week | 45%-55% premium reference range applied to $5.20 closing price on January 2, 2017. | $7.54–$8.06 |
| Premiums Paid - four weeks | 35%-50% premium reference range applied to $4.80 closing price on December 12, 2016. | $6.48–$7.20 |
| 52-Week Trading Range (informational) | Low and high closing prices for Company Shares over the 52-week period ended January 9, 2017. | $2.85–$5.86 |
| Analyst Price Target (informational) | Publicly available one-year forward Wall Street research analyst stock price target of $8.50. | $8.50 |
| Company vs. Peer Index Historical Multiples | Company average EV/LTM revenue of 0.78x/1.03x/1.29x over last 1/2/3 years vs. peer index 3.81x/4.34x/4.78x; EV/NTM revenue 0.70x/0.94x/1.15x vs. peer index 3.30x/3.44x/3.79x. | — |
Aggregate fee of $5.3 million; $500,000 payable following delivery of the opinion regardless of conclusion and $4.8 million contingent on consummation. Greenhill received approximately $1.9 million in unrelated fees from the Company during the prior two years; no services for Parent/Purchaser during that period.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | CAGR |
|---|---|---|---|---|
| Revenue | $112M | $137M | $168M | 22.5% |
| Revenue growth | 36.8% | 22.8% | 22.2% | |
| EBITDA | $4.4M | $9.9M | $19.4M | 110.0% |
| EBITDA growth | — | 125.0% | 96.0% | |
| EBITDA margin | 4% | 7% | 12% | |
| Implied EV / EBITDA | 56.3x | 25.0x | 12.8x |
Year-1 growth is against LTM at announcement ($81.6M revenue, $-6.9M EBITDA); later years are year over year.
Company management prepared two sets of long-term projections in December 2016 — a base case (reflecting the Company's preliminary 2017 budget approved by the Derma Board) and an investment case (assuming aggressive sales force investment, with higher execution risk and cost cutting elsewhere). Both were reviewed with the Derma Board, furnished to Greenhill for its fairness opinion and provided to Parent and Purchaser for diligence. Greenhill's DCF ran cash flows through the fiscal year ending December 31, 2019 under both cases; no specific revenue or EBITDA figures were disclosed in the sliced sections.
Process notes
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 → · Greenhill opinions