Hill-Rom Holdings acquired by Baxter International: fairness opinion by BofA Securities and Goldman Sachs
Deal terms
Implied value per share by method vs. $156.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of BofA Securities to the target board
Discounted cash flow assumptions
Unlevered after-tax free cash flows discounted to present value as of June 30, 2021 using mid-year convention; net debt as of June 30, 2021 (pro forma for Bardy Diagnostics acquisition) subtracted.
Selected public companies (8)
STERIS plc · Hologic, Inc. · Teleflex Incorporated · DENTSPLY SIRONA Inc. · Integra Lifesciences Holdings Corporation · ICU Medical, Inc. · CONMED Corporation · NuVasive, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2021E EBITDA | 9.8x | 17.1x | 26.3x | 14.5x–18.5x | $117.00–$156.75 |
| EV / 2022E EBITDA | 13.3x | 17.0x | 22.3x | 13.0x–17.0x | $114.50–$157.75 |
Selected precedent transactions (13)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2021-01-12 | Cantel Medical Corp. | STERIS plc | — |
| 2020-12-18 | BioTelemetry, Inc. | Koninklijke Philips N.V. | — |
| 2019-05-02 | Acelity L.P. Inc. | 3M Co | — |
| 2018-06-06 | Johnson & Johnson Advanced Sterilization Products | Fortive Corporation | — |
| 2017-04-23 | C. R. Bard, Inc. | Becton, Dickinson and Company | — |
| 2016-12-20 | LifeCell Corporation | Allergan plc | — |
| 2016-10-18 | Abbott Vascular Access Business | Terumo Corporation | — |
| 2016-02-16 | Physio-Control, Inc. | Stryker Corporation | — |
| 2016-02-01 | Sage Products LLC | Stryker Corporation | — |
| 2015-09-15 | Sirona Dental Systems Inc. | Dentsply International Inc. | — |
| 2015-07-22 | Thoratec Corporation | St. Jude Medical, Inc. | — |
| 2015-06-17 | Welch Allyn, Inc. | Hill-Rom Holdings, Inc. | — |
| 2014-10-05 | Carefusion Corporation | Becton, Dickinson and Company | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (LTM 6/30/2021) | 13.7x | 16.6x | 28.7x | 14.0x–18.0x | $104.25–$141.75 |
| EV / NTM EBITDA (NTM 6/30/2022) | 11.0x | 16.3x | 27.3x | 11.5x–16.5x | $90.50–$141.50 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-Week Trading Range (period ended July 27, 2021 - unaffected) | Trading range of Hillrom common stock for the 52-week period ended July 27, 2021, the day before The Wall Street Journal reported deal discussions. | $81.17–$123.78 |
| 52-Week Trading Range (period ended August 30, 2021) | Trading range of Hillrom common stock for the 52-week period ended August 30, 2021. | $81.17–$145.78 |
| Wall Street Analysts Unaffected Price Targets | Publicly available equity research analyst price targets as of July 27, 2021, discounted by one year at Hillrom's illustrative cost of equity of 9%. | $114.75–$120.25 |
| Wall Street Analysts Current Price Targets | Publicly available equity research analyst price targets as of August 30, 2021, discounted by one year at Hillrom's illustrative cost of equity of 9%. | $119.25–$142.25 |
Aggregate fee of approximately $11 million, $1.5 million payable upon delivery of opinion and the remainder contingent upon consummation of the merger. BofA derived ~$4.5 million of revenues from Hillrom and ~$8.0 million from Baxter for corporate/investment banking services from Sept 1, 2019 to Aug 31, 2021; anticipates less than $150,000 in fees from Baxter's amended revolving credit facilities.
Opinion of Goldman Sachs to the target board
Fee details not included in the sliced sections. Goldman Sachs acted and may continue to act as a lender under Baxter's U.S. dollar-denominated and Euro-denominated revolving credit facilities and anticipates receiving customary lender fees.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $3.4B | $3.7B | $3.9B | $4.1B | $4.3B | 6.1% |
| Revenue growth | 7.1% | 7.8% | 5.6% | 5.4% | 5.4% | |
| EBITDA | $808M | $900M | $957M | $1.0B | $1.1B | 7.5% |
| EBITDA growth | 14.3% | 11.4% | 6.3% | 6.2% | 6.2% | |
| EBITDA margin | 24% | 24% | 25% | 25% | 25% | |
| Implied EV / EBITDA | 15.4x | 13.8x | 13.0x | 12.2x | 11.5x |
Year-1 growth is against LTM at announcement ($3.2B revenue, $707M EBITDA); later years are year over year.
Hillrom management prepared standalone unaudited projections covering Q4 FY2021E and fiscal years 2022E through 2031E (fiscal year ending September 30), which were given to the Hillrom Board, Goldman Sachs, BofA Securities and Baxter. Revenue was projected to grow from $767 million in Q4 FY2021E and $3,197 million in 2022E to $5,303 million in 2031E, with Adjusted EBITDA of $707 million in 2022E rising to $1,418 million in 2031E, and unlevered free cash flow of $493 million in 2022E rising to $1,016 million in 2031E. Management also provided estimates of LTM Adjusted EBITDA (twelve months ended June 30, 2021) of $632 million and NTM Adjusted EBITDA (twelve months ending June 30, 2022) of $688 million.
Process notes
Other Medical Devices and Supplies fairness opinions
- Misonix / Bioventus 2021
- Cantel Medical / STERIS 2021 · 16.2x EV/EBITDA
- SeaSpine Holdings / Orthofix Medical 2022
- Abiomed / Johnson & Johnson 2022 · 55.9x EV/EBITDA
- Apollo Endosurgery / Boston Scientific 2022
- Intersect ENT / Medtronic 2022
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