Hansen Medical acquired by Auris Surgical Robotics: fairness opinion by Perella Weinberg Partners
Deal terms
Implied value per share by method vs. $4.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Perella Weinberg Partners to the special committee
Discounted cash flow assumptions
Present value as of April 15, 2016. Implied per share ranges: Management Case 1 $5.78-$7.68; Management Case 2 $2.92-$4.05; Management Case 3 $0.76-$1.34. Equity value derived by subtracting debt and adding cash and cash equivalents (including restricted cash) as of December 31, 2015; per share using fully diluted treasury method.
Selected public companies (12)
Accuray Incorporated · Alphatec Holdings Inc. · Cardica, Inc. · CryoLife · Cardiovascular Systems Inc · Cutera, Inc. · Corindus Vascular Robotics Inc · LeMaitre Vascular Inc · Spectranetics Corp · Stereotaxis Inc · Titan Medical Inc. · Transenterix Inc
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2016E Revenues | — | 2.3x | — | 1.2x–3.2x | $0.74–$2.56 |
| EV / 2017E Revenues | — | 2.6x | — | 1.1x–2.9x | $1.03–$3.29 |
| EV / 2018E Revenues | — | 1.7x | — | 1.0x–2.5x | $1.40–$4.05 |
| Average EV / NTM Revenues (1-month period prior to April 15, 2016) | — | — | — | — | — |
Selected precedent transactions (12)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-10 | Bluebelt Holdings, Inc. | Smith & Nephew plc | 14.5x EV/LTM Revenues |
| 2015-10 | TriVascular Technologies, Inc. | Endologix, Inc. | 5.9x EV/LTM Revenues |
| 2015-10 | nContact, Inc. | AtriCure Inc. | 17.0x EV/LTM Revenues |
| 2015-07 | Thoratec Corp. | St. Jude Medical Inc. | 7.3x EV/LTM Revenues |
| 2015-07 | RF Surgical Systems, Inc. | Medtronic plc | 4.7x EV/LTM Revenues |
| 2014-05 | Interventional Division of Bayer AG | Boston Scientific Corporation | 3.5x EV/LTM Revenues |
| 2013-12 | Given Imaging Ltd. | Covidien plc | 4.4x EV/LTM Revenues |
| 2013-09 | MAKO Surgical Corp. | Stryker Corp. | 14.1x EV/LTM Revenues |
| 2011-08 | Concentric Medical, Inc. | Stryker Corp. | 4.5x EV/LTM Revenues |
| 2011-05 | Orthovita Inc. | Stryker Corp. | 3.3x EV/LTM Revenues |
| 2010-04 | ATS Medical, Inc. | Medtronic, Inc. | 4.3x EV/LTM Revenues |
| 2008-02 | Possis Medical Inc. | Bayer AG | 4.4x EV/LTM Revenues |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenues (applied to 2015 revenues of ~$16 million) | 3.3x | 4.6x | 17.0x | 4.0x–7.0x | $2.85–$5.26 |
| EV / NTM Revenues (applied to 2016E revenues of ~$18 million) | 3.1x | 4.9x | 13.6x | 3.0x–5.0x | $2.37–$4.20 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading and Transaction Premium Analysis | Reviewed one-year trading prices through April 15, 2016 and premiums to the Unaffected Price Date (March 31, 2016): closing price $2.61 (53.3% premium), 30-day VWAP $2.60 (53.7%), 60-day VWAP $3.74 (6.9%), 90-day VWAP $3.54 (13.0%), 52-week intra-day high $12.20 ((67.2)%). Perella Weinberg believed prices after March 31, 2016 may have been influenced by market speculation/leak (April 1, 2016 close of $3.65, up 39.8%). | $2.60–$12.20 |
| Implied Transaction Multiples | Based on $4.00 merger consideration: EV/LTM Revenues 5.4x, EV/CY2016E Revenues 4.8x, EV/CY2017E Revenues 3.5x. | — |
| Precedent Premium Paid Analysis | Dealogic data on acquisitions of public companies $50 million-$1 billion from March 1, 2011 to March 31, 2016 (876 all-industry deals: 25th percentile 19%, median 35%, 75th percentile 60%; 107 healthcare deals: 24%/40%/69%; mixed cash-and-stock and all-stock subgroups also reviewed). Applied a representative premium range of 20%-60% to the Unaffected Price Date share price. | $3.12–$4.16 |
Engagement letter dated December 9, 2015, as amended; Hansen agreed to pay Perella Weinberg $1,000,000 upon delivery of its opinion, plus expense reimbursement and indemnification. Opinion rendered to both the Board and the Special Committee.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $25.0M | $35.0M | $49.0M | $65.0M | 37.5% |
| Revenue growth | 38.9% | 40.0% | 40.0% | 32.7% | |
| EBITDA | $-13.0M | $-7.0M | $1.0M | $10.0M | — |
| EBITDA growth | — | — | — | 900.0% | |
| EBITDA margin | -52% | -20% | 2% | 15% | |
| Implied EV / EBITDA | — | — | 80.0x | 8.0x |
Year-1 growth is against LTM at announcement ($18.0M revenue, $-18.0M EBITDA); later years are year over year.
Management prepared financial projections for 2016-2020: revenue of $18 million in 2016E rising to $65 million in 2020E, with EBITDA of $(18) million in 2016E turning positive to $10 million in 2020E and unlevered free cash flow of $(20) million to $2 million. Three long-term management cases extended 2021E-2025E: Case 1 (20% revenue CAGR 2020-2025, 40% 2025 EBITDA margin) reaching $162 million revenue and $65 million EBITDA in 2025E; Case 2 (15% CAGR, 30% margin) $131 million revenue / $39 million EBITDA; Case 3 (10% CAGR, 20% margin) $105 million revenue / $21 million EBITDA. Assumptions included system sales growing from 4 to 15 units per quarter, service renewal rate rising from 50% to 65%, a 35% long-term tax rate and a $117 million federal NOL carryforward as of December 31, 2015.
Process notes
Other Medical Devices and Supplies fairness opinions
- Vascular Solutions / Teleflex 2016 · 25.7x EV/EBITDA
- EndoChoice Holdings / Boston Scientific 2016
- HeartWare International / Medtronic 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 → · Perella Weinberg Partners opinions