FEI acquired by Thermo Fisher Scientific: fairness opinion by Goldman Sachs
Deal terms
Implied value per share by method vs. $107.50 offer
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
Discounted cash flow assumptions
Discounted to present value as of April 3, 2016; cash (cash and equivalents, restricted cash and marketable securities as of Q1 2016 filing) added to enterprise values; fully diluted shares per management using Treasury Stock Method.
Selected public companies (12)
Agilent Technologies, Inc. · Bruker Corporation · Danaher Corporation · Mettler-Toledo International Inc. · Oxford Instruments plc · PerkinElmer, Inc. · Thermo Fisher Scientific Inc. · Waters Corporation · AMETEK, Inc. · Applied Materials, Inc. · Lam Research Corporation · Spectris plc
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Science Segment Peers - 2016E EV / Revenue | 1.4x | 3.5x | 4.9x | — | — |
| Science Segment Peers - 2016E EV / EBITDA | 9.0x | 15.2x | 17.9x | — | — |
| Science Segment Peers - 2016E P / E | 13.0x | 21.0x | 26.1x | — | — |
| Industry Segment Peers - 2016E EV / Revenue | 1.8x | 2.3x | 3.3x | — | — |
| Industry Segment Peers - 2016E EV / EBITDA | 7.8x | 10.5x | 12.3x | — | — |
| Industry Segment Peers - 2016E P / E | 12.4x | 14.9x | 19.6x | — | — |
Selected precedent transactions (11)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2012-10-16 | Cymer, Inc. | ASML Holding NV | 38.1x EV / LTM EBITDA |
| 2016-01-08 | Affymetrix Inc. | Thermo Fisher Scientific Inc. | 26.5x EV / LTM EBITDA |
| 2015-05-13 | Pall Corp. | Danaher Corp. | 20.8x EV / LTM EBITDA |
| 2010-12-13 | Dionex Corporation | Thermo Fisher Scientific Inc. | 20.5x EV / LTM EBITDA |
| 2011-05-04 | Varian Semiconductor Equipment Associates, Inc. | Applied Materials, Inc. | 14.3x EV / LTM EBITDA |
| 2010-12-05 | Verigy Ltd. | Advantest Corporation | 14.0x EV / LTM EBITDA |
| 2015-10-21 | KLA-Tencor Corp. | Lam Research Corp. | 13.6x EV / LTM EBITDA |
| 2013-04-15 | Life Technologies Corp. | Thermo Fisher Scientific Inc. | 13.2x EV / LTM EBITDA |
| 2008-06-12 | Applied Biosystems, Inc. | Invitrogen Corporation | 13.1x EV / LTM EBITDA |
| 2009-07-27 | Varian, Inc. | Agilent Technologies, Inc. | 11.2x EV / LTM EBITDA |
| 2011-12-14 | Novellus Systems, Inc. | Lam Research Corp. | 10.0x EV / LTM EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | 10.0x | 14.0x | 38.1x | 12.5x–20.0x | $73.41–$111.44 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading Analysis | Reviewed ten-year trading prices/volumes through May 25, 2016; $107.50 represented a 15.5% premium to the May 25, 2016 closing price, 21.7% to 1-month VWAP, 23.5% to 3-month VWAP and 15.1% to the 52-week high closing price. | — |
| Illustrative Present Value of Future Share Price Analysis (Forward P/E) | Applied NTM Forward P/E multiples of 17.0x-24.0x to estimated 2017-2019 EPS to derive future equity values per share at year-ends 2016-2018, discounted to April 3, 2016 at a 10.6% cost of equity, plus discounted cumulative dividends per share. | $81.11–$127.10 |
| Illustrative Present Value of Future Share Price Analysis (Forward EV/EBITDA) | Applied NTM Forward EV/EBITDA multiples of 11.0x-14.0x to estimated 2017-2019 EBITDA, added estimated net cash, divided by estimated fully diluted shares, discounted to April 3, 2016 at a 10.6% cost of equity, plus discounted dividends. | $87.27–$119.78 |
| Selected Historical Premia Analysis | Reviewed all-cash domestic M&A transactions since 2010 with value greater than $1 billion (Thomson Reuters); annual median one-day premia ranged from 24.6% (2014) to 42.0% (2016 through May 24, 2016), median 32.8%. Applied a 25%-35% premia range to the unaffected closing price of $93.09. | $116.36–$125.67 |
Transaction fee estimated at approximately $47.5 million, $10 million of which became payable at announcement and the remainder contingent upon consummation of the Merger; engagement letter dated April 25, 2016. Expense reimbursement and indemnity also provided.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $1.2B | $1.3B | $1.4B | $1.5B | 7.5% |
| Revenue growth | 7.5% | 7.1% | 7.6% | 7.7% | |
| EBITDA | $314M | $353M | $400M | $444M | 12.3% |
| EBITDA growth | 15.6% | 12.7% | 13.3% | 10.9% | |
| EBITDA margin | 27% | 28% | 30% | 30% | |
| Implied EV / EBITDA | 13.0x | 11.6x | 10.2x | 9.2x |
Year-1 growth is against LTM at announcement ($1.1B revenue, $271M EBITDA); later years are year over year.
FEI management prepared two sets of five-year projections (fiscal 2016-2020) in fall 2015, updated for actual balances as of December 31, 2015 and adjusted to include the DCG Systems acquisition forecast: the Case One Projections (base case) and the more optimistic Case Two Projections. Case One shows non-GAAP revenue growing from $1,095.7 million in 2016E to $1,461.6 million in 2020E, EBITDA from $271.2 million to $443.8 million, and unlevered free cash flow from $162.1 million to $282.6 million. Case Two shows non-GAAP revenue of $1,095.7 million in 2016E rising to $1,679.6 million in 2020E and EBITDA of $271.2 million rising to $506.8 million; the Board instructed Goldman Sachs to use the Case One Projections (the "Forecasts") for its financial analyses.
Process notes
Other Diagnostics / Life Sciences fairness opinions
- Sequenom / Laboratory Corporation of America 2016
- Advanced Accelerator Applications / Novartis 2017
- Alere / Abbott Laboratories 2017 · 14.3x EV/EBITDA
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
- Pall / Danaher 2015 · 20.5x EV/EBITDA
- Bio-Reference Laboratories / Opko Health 2015 · 12.1x EV/EBITDA
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