Dionex acquired by Thermo Fisher Scientific: fairness opinion by Goldman Sachs
Announced December 13, 2010 · Tender offer · All cash ·
SC 14D9 filed December 20, 2010
Diagnostics / Life Sciences Diagnostic Tools
Enterprise value
$2.0B
EV / LTM EBITDA
17.8x
EBITDA $114M · 25% margin
EV / LTM revenue
4.44x
revenue $457M
DCF discount rate
8.0%–10.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$118.50
Premium20.7%
Premium basisClosing price of $98.17 per share on December 10, 2010
StructureTender offer
Termination fee$65.0M
Reverse termination fee—
Go-shopNone
Outside date—
FilingSC 14D9 · EDGAR index
Implied value per share by method vs. $118.50 offer
Selected companies — Dionex EV / LTM EBITDA at $118.50 offer price (vs 16.7x as of 12/10/2010) $118.50
Selected companies — Dionex EV / CY2010E EBITDA at $118.50 offer price (vs 16.1x as of 12/10/2010) $118.50
Selected companies — Dionex EV / CY2011E EBITDA at $118.50 offer price (vs 14.4x as of 12/10/2010) $118.50
Selected companies — Dionex P / CY2010E EPS at $118.50 offer price (vs 28.0x as of 12/10/2010) $118.50
Selected companies — Dionex P / CY2011E EPS at $118.50 offer price (vs 24.5x as of 12/10/2010) $118.50
Discounted cash flow $98.72 – $139.27
Illustrative Present Value of Future Share Price Analysis $78.80 – $115.78
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Delivered December 12, 2010
Discounted cash flow assumptions
Discount rate8.0%–10.0%
BasisEstimates of Dionex's weighted average cost of capital
Terminal valueExit multiple
Perpetuity growth—
Exit multiple12.0x–17.0x LTM EBITDA (fiscal year 2015 terminal value)
Projection periodFY2011-FY2015
Projections usedFinancial Forecast (Dionex management, prepared October 2010, updated December 2010)
Implied value per share$98.72–$139.27
Free cash flows discounted to December 31, 2010 using mid-year convention; net debt and minority interest based on the midpoint of actual FY end June 30, 2010 figures and estimated FY2011 figures.
Selected public companies (12)
Agilent Technologies, Inc. · Bruker Corporation · Life Technologies Corporation · Mettler-Toledo International, Inc. · PerkinElmer, Inc. · Tecan Group Ltd. · Thermo Fisher Scientific Inc. · Waters Corporation · CLARCOR Inc. · Donaldson Company, Inc. · ESCO Technologies Inc. · Pall Corporation
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (Life Sciences Instruments peers) | 9.7x | 12.1x | 21.1x | — | — |
| EV / LTM EBITDA (Filtration peers) | 11.0x | 12.4x | 14.9x | — | — |
| EV / CY2010E EBITDA (Life Sciences Instruments peers) | 10.5x | 12.8x | 15.0x | — | — |
| EV / CY2010E EBITDA (Filtration peers) | 11.4x | 12.2x | 14.1x | — | — |
| EV / CY2011E EBITDA (Life Sciences Instruments peers) | 9.7x | 11.0x | 13.8x | — | — |
| EV / CY2011E EBITDA (Filtration peers) | 9.9x | 11.1x | 12.2x | — | — |
| P / CY2010E EPS (Life Sciences Instruments peers) | 15.0x | 19.0x | 25.6x | — | — |
| P / CY2010E EPS (Filtration peers) | 21.6x | 22.4x | 24.2x | — | — |
| P / CY2011E EPS (Life Sciences Instruments peers) | 13.4x | 15.9x | 20.7x | — | — |
| P / CY2011E EPS (Filtration peers) | 18.6x | 19.5x | 20.3x | — | — |
| Dionex EV / LTM EBITDA at $118.50 offer price (vs 16.7x as of 12/10/2010) | — | — | — | 20.5x | $118.50 |
| Dionex EV / CY2010E EBITDA at $118.50 offer price (vs 16.1x as of 12/10/2010) | — | — | — | 19.8x | $118.50 |
| Dionex EV / CY2011E EBITDA at $118.50 offer price (vs 14.4x as of 12/10/2010) | — | — | — | 17.6x | $118.50 |
| Dionex P / CY2010E EPS at $118.50 offer price (vs 28.0x as of 12/10/2010) | — | — | — | 33.8x | $118.50 |
| Dionex P / CY2011E EPS at $118.50 offer price (vs 24.5x as of 12/10/2010) | — | — | — | 29.6x | $118.50 |
Selected precedent transactions (17)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2010 | Veeco Instruments Inc. | Bruker Corporation | — |
| 2010 | Millipore Corporation | Merck KGaA | — |
| 2010 | Ahura Scientific Inc. | Thermo Fisher Scientific Inc. | — |
| 2009 | AB SCIEX | Danaher Corporation | — |
| 2009 | MDS Analytical Technologies | Danaher Corporation | — |
| 2009 | Varian Inc. | Agilent Technologies Inc. | — |
| 2008 | Applied Biosystems Inc. | Invitrogen Corp. | — |
| 2008 | Whatman plc | GE Healthcare Life Sciences | — |
| 2007 | New Brunswick Scientific Co. | Eppendorf Group | — |
| 2007 | Stedim AG | Sartorius AG | — |
| 2007 | Molecular Devices Corporation | MDS Inc. | — |
| 2006 | Biacore International AB | GE Healthcare Life Sciences | — |
| 2006 | Fisher Scientific International Inc. | Thermo Electron Corporation | — |
| 2006 | Serologicals Corporation | Millipore Corporation | — |
| 2005 | CUNO Incorporated | 3M Company | — |
| 2005 | Kendro Laboratory Products (subsidiary of SPX Corporation) | Thermo Electron Corporation | — |
| 2005 | JRH Biosciences Division of CSL Limited | Sigma-Aldrich Corporation | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Sales | 1.4x | 3.1x | 5.1x | — | — |
| EV / LTM EBITDA | 10.9x | 15.7x | 23.5x | — | — |
| EV / LTM EBIT | 12.3x | 19.9x | 29.1x | — | — |
| Premium to 1 day prior close (%) | 0.0x | 0.2x | 0.5x | — | — |
| Premium to 4 weeks prior close (%) | 0.0x | 0.4x | 0.7x | — | — |
| Premium to 52-week high (%) | -0.1x | 0.0x | 0.0x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading Analysis | Reviewed trading prices/volumes for the 52-week period ended December 10, 2010. $118.50 represented a 20.7% premium to the $98.17 close on 12/10/2010, a 30.5% premium to the $90.77 close on 11/12/2010 (four weeks prior), and a 19.8% premium to the $98.88 52-week high intraday price. | — |
| Illustrative Present Value of Future Share Price Analysis | Applied price to forward earnings multiples of 18.5x to 24.5x to CY2012-CY2014 EPS estimates from the Financial Forecast to derive implied per share values for CY2011-CY2013, discounted at an illustrative 9.0% cost of equity. | $78.80–$115.78 |
| Premia Paid Analysis | Median premia for announced/completed all-cash U.S. majority-ownership transactions since 2007 with EV of $1-5 billion: 1-day/4-week/52-week-high premia of 20.4%/23.2%/8.5% (2007), 39.7%/35.2%/5.1% (2008), 31.5%/39.7%/19.1% (2009), 40.9%/41.4%/9.5% (2010), versus the proposed transaction at 20.7%/30.5%/19.8%. | — |
| Historical Dionex LTM EBITDA Multiples | Dionex EV / LTM EBITDA: 3-year mean 12.7x, 2-year mean 12.0x, 1-year mean 13.9x, 6-month mean 14.3x, current 16.7x. | — |
Fee arrangement not disclosed in the sliced sections. Goldman Sachs disclosed prior investment banking services to Thermo Fisher, including dealer manager on its 2009 convertible notes tender offer and co-manager on senior notes offerings in April 2010 and November 2010.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $509M | $555M | $605M | $660M | 9.0% |
| Revenue growth | 11.3% | 9.1% | 8.9% | 9.0% | |
| EBITDA | — | — | — | — | — |
| EBITDA growth | — | — | — | — | |
| EBITDA margin | — | — | — | — | |
| Implied EV / EBITDA | — | — | — | — |
Year-1 growth is against LTM at announcement ($457M revenue, $114M EBITDA); later years are year over year.
Dionex management prepared the "Financial Forecast" in October 2010 (updated December 2010 for currency exchange rate changes), approved by the Dionex Board and provided to Goldman Sachs. It covered fiscal years 2010 through 2015: net sales growing from $419.6M in FY2010 to $659.7M in FY2015, net income from $59.1M to $107.3M, and fully diluted EPS from $3.28 to $6.54. Goldman Sachs used the Financial Forecast in its DCF (FY2011-FY2015) and present value of future share price analyses.
Process notes
Schedule 14D-9 for a cash tender offer by Thermo Fisher (Purchaser subsidiary). Goldman Sachs was sole financial advisor to Dionex; no fee amounts were disclosed in the sliced sections. Goldman Sachs was not requested to, and did not, solicit interest from other parties. Merger agreement counsel: Wachtell Lipton (Thermo Fisher) and Cooley (Dionex). Confidentiality agreement dated November 29, 2010.
Other Diagnostics / Life Sciences fairness opinions
- Beckman Coulter / Danaher 2011 · 8.4x EV/EBITDA
- Genoptix / Novartis AG 2011 · 11.0x EV/EBITDA
- Gen-Probe / Hologic 2012 · 16.1x EV/EBITDA
- MEDTOX Scientific / Laboratory Corporation of America 2012 · 12.7x EV/EBITDA
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
All Diagnostics / Life Sciences opinions → · Goldman Sachs opinions