EndoChoice Holdings acquired by Boston Scientific: fairness opinion by Guggenheim Securities
Deal terms
Implied value per share by method vs. $8.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Guggenheim Securities to the target board
Discounted cash flow assumptions
Two-stage terminal/continuing value methodology; approximately $1.32 to $1.49 per share of the range attributable to the present value of NOL carryforwards; valued as of September 30, 2016; excluded effects of any potential future equity capital raise and related dilution.
Selected public companies (4)
Avinger, Inc. · ConforMIS, Inc. · SeaSpine Holdings Corporation · Tandem Diabetes Care, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2016E Revenue | 0.7x | 3.3x | 5.0x | 2.0x–3.3x | $6.35–$10.25 |
| EV / 2017E Revenue | 0.7x | 2.5x | 3.3x | 1.5x–2.5x | $5.95–$9.90 |
Selected precedent transactions (10)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-02-27 | Optos Plc | Nikon Corporation | — |
| 2014-06-26 | Ulthera, Inc. | Merz Pharma Group | — |
| 2013-12-08 | Given Imaging Ltd. | Covidien plc | — |
| 2013-06-28 | C.R. Bard, Inc. (Electrophysiology Business) | Boston Scientific Corporation | — |
| 2013-06-12 | ZONARE Medical Systems, Inc. | Mindray Medical International Limited | — |
| 2013-01-08 | Ultrasonix Medical Corporation | Analogic Corporation | — |
| 2011-12-15 | SonoSite, Inc. | FUJIFILM Holdings Corporation | — |
| 2011-03-07 | TomoTherapy Incorporated | Accuray Incorporated | — |
| 2008-09-16 | Datascope Corp. | Getinge AB | — |
| 2008-03-11 | Datascope Corp. (Patient Monitoring Business) | Mindray Medical International Limited | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Transaction Value / LTM Revenue | 0.7x | 2.4x | 6.7x | 2.3x–3.3x | $6.60–$9.50 |
| Transaction Value / NTM Revenue | 0.6x | 2.5x | 4.5x | 2.0x–3.0x | $7.60–$11.40 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Stock Price Trading History (52-week period ended September 23, 2016) | Range of stock prices for the Company during the 52-week period ended September 23, 2016. | $3.65–$13.40 |
| Selected Premiums Paid | 24 selected healthcare industry transactions announced during the five-year period ended September 23, 2016 with transaction values above $50 million involving public targets with stock prices under $5.00 per share; 25th to 75th percentile one-day premiums of approximately 39.8% to 72.9% applied to the $4.12 closing price on September 23, 2016. | $5.75–$7.10 |
| Wall Street Equity Research Analysts' Discounted Stock Price Targets | Analyst price targets of $5.50 to $10.00 per share discounted to present value as of September 30, 2016 using an illustrative 12.95% discount rate (approximate midpoint of the Company's cost of equity). | $4.70–$8.85 |
| Implied Transaction Statistics | At $8.00 per share: 94% premium to $4.12 closing price on September 23, 2016; 94% to 30-day VWAP of $4.11; 83% to 90-day VWAP of $4.38; implied EV/LTM revenue of 2.73x vs 1.39x at market and EV/NTM revenue of 2.10x vs 1.07x at market. | — |
Fee terms described under Item 5 of the Schedule 14D-9; amounts not included in the sections provided. Guggenheim had not been engaged by or received fees from the Company or Parent in the prior two years.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | CAGR |
|---|---|---|---|---|
| Revenue | $135M | $173M | $216M | 26.5% |
| Revenue growth | 26.2% | 28.1% | 24.9% | |
| EBITDA | $4.0M | $23.0M | $45.0M | 235.4% |
| EBITDA growth | — | 475.0% | 95.7% | |
| EBITDA margin | 3% | 13% | 21% | |
| Implied EV / EBITDA | 114.5x | 19.9x | 10.2x |
Year-1 growth is against LTM at announcement ($107M revenue, $-14.0M EBITDA); later years are year over year.
Management prepared several sets of projections (April 2016 Base and Operating Cases, June 2016 Projections, First and Second August 2016 Projections). Guggenheim relied on the Second August 2016 Projections ("Company Forecast", CY2016E-CY2023E) plus Illustrative NOL Extrapolations for 2024E-2026E: revenue of $84M in 2016E growing to $260M in 2023E, Adjusted EBITDA of $(36)M in 2016E improving to $64M in 2023E, and unlevered free cash flow of $(48)M in 2016E rising to $24M in 2023E and $28M in 2026E. Earlier cases (e.g., April 2016 Operating Case) projected 2020E revenue as high as $247M with $61M Adjusted EBITDA but were superseded.
Process notes
Other Medical Devices and Supplies fairness opinions
- Vascular Solutions / Teleflex 2016 · 25.7x EV/EBITDA
- HeartWare International / Medtronic 2016
- Hansen Medical / Auris Surgical Robotics 2016
- LDR Holding / Zimmer Biomet Holdings 2016
- Symmetry Surgical / Roundtable Healthcare Partners 2016 · 12.6x EV/EBITDA
- Newport / MKS Instruments 2016 · 8.2x EV/EBITDA
All Medical Devices and Supplies opinions → · Guggenheim Securities opinions