Dialysis Corporation of America acquired by U.S. Renal Care: fairness opinion by Dresner Partners
Deal terms
Implied value per share by method vs. $11.25 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Dresner Partners to the target board
Discounted cash flow assumptions
Unlevered free cash flow defined as projected earnings before interest and minority interest expense and after taxes, plus D&A, less capex, plus stock-based compensation, adjusted for working capital changes. Equity value derived by adding cash, subtracting interest-bearing debt and the value of minority interests in consolidated subsidiaries, then dividing by total shares outstanding.
Selected public companies (2)
Fresenius Medical Care AG & Co. (DB: FME) · DaVita, Inc. (NYSE: DVA)
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | — | — | — | 7.0x–8.0x | $6.20–$7.24 |
| EV / LTM Revenues | — | — | — | 0.8x–1.2x | $6.96–$11.00 |
| Price / LTM Earnings | — | — | — | 14.0x–16.0x | $4.20–$4.80 |
Selected precedent transactions (4)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2006-02 | Fresenius Medical Care AG/ Renal Care Group, Inc. (100 centers) | National Renal Institutes, Inc. (DSI Holding Company) | — |
| 2005-07 | DaVita, Inc./Gambro Healthcare US (70 centers) | Renal America, Inc. (Renal Advantage, Inc.) | — |
| 2005-05 | Renal Care Group, Inc. | Fresenius Medical Care AG | — |
| 2004-12 | Gambro Healthcare US | DaVita, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Aggregate transaction value / LTM EBITDA | — | — | — | 6.0x–8.0x | — |
| Aggregate transaction value / current patients ($ per patient) | — | — | — | 45000.0x–65000.0x | — |
| Combined precedent transaction analysis (EV/LTM EBITDA and EV/patient) | — | — | — | — | $5.16–$12.06 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Range Analysis | Closing prices for periods ended April 12, 2010: three months $6.20-$6.92; six months $6.20-$7.37; one year $4.15-$7.70. The $11.25 consideration represents a 73% premium to the unaffected $6.52 close on April 12, 2010, a 46% premium to the one-year high of $7.70 and a 171% premium to the one-year low of $4.15. | $4.15–$7.70 |
| Premiums Paid Analysis | Reviewed premiums in all change-of-control transactions for companies with market capitalization under $250 million announced in the past 12 months and past 3 years. Last 12 months median premiums: 40.1% (1 day), 40.0% (1 week), 55.0% (30 days); 25th/75th percentiles 23.5%/72.2%, 22.8%/77.5%, 32.8%/97.8%. Last 3 years median premiums: 35.2% (1 day), 35.2% (1 week), 36.1% (30 days). Applying median premiums to DCA's share price as of April 12, 2010 yielded implied values of $8.76 to $10.38. | $8.76–$10.38 |
$50,000 non-refundable, creditable retainer paid upfront; $500,000 transaction fee payable if the Merger is consummated, with no separate or additional fee for delivery of the opinion. If the Merger is not consummated, the Company must pay a $100,000 fee in connection with delivery of the opinion. Expense reimbursement and indemnification also provided.
Management projections
The Company shared limited estimated and projected financial data with parties that had executed confidentiality agreements (December 2009 / January 2010), excluding corporate general and administrative expenses but including rental income: total treatments of 297,435 (2009E) rising to 355,291 (2012E); revenues of $96.8 million (2009E), $103.0 million (2010E), $110.9 million (2011E) and $118.0 million (2012E); and Clinical EBITDA of $20.5 million (2009E), $22.8 million (2010E), $26.2 million (2011E) and $28.7 million (2012E). The 2011 and 2012 projections do not reflect the impact of the proposed bundled Medicare reimbursement system. Dresner Partners' DCF used management's financial projections through December 31, 2014, along with sensitivity cases on treatment/revenue growth, reimbursement rates, payor mix, operating expenses and capital expenditures.
Process notes
Other Specialty Outpatient Facilities fairness opinions
- HealthTronics / Endo Health Solutions 2010 · 8.7x EV/EBITDA
- NovaMed / Surgery Partners 2011 · 7.8x EV/EBITDA
- AmSurg / Envision Healthcare Holdings 2016 · 12.0x EV/EBITDA
- Alliance Healthcare Services / Tahoe Investment Group Co. 2017 · 5.7x EV/EBITDA
- Surgical Care Affiliates / Optum 2017 · 16.4x EV/EBITDA
- FONAR / Damadian family Acquisition Group 2025 · 4.3x EV/EBITDA
All Specialty Outpatient Facilities opinions → · Dresner Partners opinions