LDR Holding acquired by Zimmer Biomet Holdings: fairness opinion by BofA Securities
Deal terms
Implied value per share by method vs. $37.00 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
Cash flows discounted to present value as of March 31, 2016. Separately valued NOLs (35% federal tax rate) at $0.74-$0.81 per share, producing an implied range including NOLs of $30.91-$42.10 per share.
Selected public companies (8)
Globus Medical Inc. · K2M Group Holdings, Inc. · NuVasive, Inc. · Endologix, Inc. · Entellus Medical, Inc. · Intersect ENT Inc. · Penumbra, Inc. · Spectranetics Corp.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2016E Revenue | 2.6x | 3.5x | 7.4x | 3.5x–4.3x | $24.78–$29.31 |
| EV / CY2017E Revenue | 2.3x | 3.2x | 6.1x | 3.3x–3.8x | $27.96–$31.69 |
Selected precedent transactions (15)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| — | Sage Products LLC | Stryker Corporation | — |
| — | Ellipse Technologies Inc. | NuVasive | — |
| — | Trivascular Technologies, Inc. | Endologix | — |
| — | Tornier, Inc. | Wright Medical Group N.V. | — |
| — | Ulthera, Inc. | Merz Pharmaceuticals, LLC | — |
| — | Angioscore Inc. | Spectranetics | — |
| — | AnthroCare Corporation | Smith and Nephew plc | — |
| — | Given Imaging Ltd. | Covidien plc | — |
| — | Mako Surgical Corp. | Stryker | — |
| — | Conceptus Inc. | Bayer AG | — |
| — | ev3 Inc. | Covidien | — |
| — | AGA Medical Corporation | St. Jude Medical, Inc. | — |
| — | Acclarent Inc. | Johnson & Johnson, Inc. | — |
| — | Ascent Healthcare Solutions, Inc. | Stryker | — |
| — | CoreValue, Inc. | Medtronic, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue (as of 3/31/2016A) | 4.0x | 5.4x | 14.1x | 5.0x–7.5x | $30.52–$43.68 |
| EV / NTM Revenue (as of 3/31/2017E) | 3.3x | 4.8x | 10.6x | 4.0x–6.5x | $29.85–$45.87 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical trading prices and volumes | Reviewed historical trading prices and trading volumes of LDR common stock during the one-year period ended June 3, 2016 (considered as another factor). | — |
| Analyst price targets | Reviewed a range of publicly available research analyst price targets for LDR as of June 3, 2016 (considered as another factor). | — |
Aggregate fee of $17.1 million, $1.5 million payable upon delivery of the opinion, remainder contingent upon consummation of the Offer; expense reimbursement and indemnification also provided.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $234M | $286M | $346M | $423M | 21.9% |
| Revenue growth | 23.9% | 22.7% | 20.8% | 22.1% | |
| EBITDA | $4.8M | $32.7M | $66.4M | $113M | 186.7% |
| EBITDA growth | — | 581.3% | 103.1% | 70.4% | |
| EBITDA margin | 2% | 11% | 19% | 27% | |
| Implied EV / EBITDA | 218.0x | 32.0x | 15.8x | 9.2x |
Year-1 growth is against LTM at announcement ($188M revenue, $-14.0M EBITDA); later years are year over year.
LDR management prepared an unaudited standalone Management Forecast for fiscal years 2016 through 2020 in early April 2016, approved by the LDR Board and provided to Parent and BofA Merrill Lynch. Net revenue was projected to grow from $188.45 million in 2016E to $422.59 million in 2020E, with Adjusted EBITDA of $(14.0) million in 2016E rising to $113.1 million in 2020E and net income moving from a $(35.1) million loss in 2016E to $63.6 million in 2020E. The forecast excluded any effects of the Offer or Merger, including synergies, and also supported a separate valuation of LDR's NOLs.
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
- Hansen Medical / Auris Surgical Robotics 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 → · BofA Securities opinions