Liberator Medical Holdings acquired by C. R. Bard: fairness opinion by JMP Securities
Announced November 20, 2015 · One-step merger · All cash ·
DEFM14A filed December 29, 2015
Medical Devices and Supplies Medical Supplies
Enterprise value
$181M
equity $180M
EV / LTM EBITDA
11.5x
EBITDA $15.7M · 17% margin
EV / LTM revenue
2.01x
revenue $89.9M
DCF discount rate
12.0%–16.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$3.35
Premium25.9%
Premium basisclosing price of $2.66 on November 19, 2015, the last full trading day before signing
StructureOne-step merger
Termination fee$7.2M (4.0% of equity)
Reverse termination fee—
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $3.35 offer
Selected companies — EV / CY2015E EBITDA (applied to Liberator) $2.39 – $4.26
Selected companies — EV / CY2016E EBITDA (applied to Liberator) $2.40 – $4.18
Selected companies — P / CY2015E EPS (applied to Liberator) $2.48 – $4.06
Selected companies — P / CY2016E EPS (applied to Liberator) $2.52 – $4.35
Selected companies — EV / CY2015E Cash EBITDA (informational) $1.73 – $3.05
Selected companies — EV / CY2016E Cash EBITDA (informational) $1.93 – $3.33
Precedent transactions — EV / LTM EBITDA $2.04 – $4.83
Precedent transactions — EV / LTM Cash EBITDA (informational) $1.40 – $3.23
Discounted cash flow $2.40 – $3.72
Premiums Paid Analysis (1-day) $2.94 – $3.47
Premiums Paid Analysis (1-week, informational) $3.05 – $3.67
Premiums Paid Analysis (1-month, informational) $3.04 – $3.80
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of JMP Securities to the target board
Delivered November 19, 2015 · Fee $1.8M ($1.6M contingent on closing), $0.3M on delivery of the opinion
Discounted cash flow assumptions
Discount rate12.0%–16.0%
BasisJMP Securities' analysis of Liberator's weighted average cost of capital
Terminal valueExit multiple
Perpetuity growth—
Exit multiple10.0x–14.0x forecasted 2020 EBITDA
Projection period2016E-2020E
Projections usedLiberator management forecasts (five-year projections provided October 27, 2015)
Implied value per share$2.40–$3.72
Fully-taxed unlevered free cash flows discounted to present value as of December 31, 2015; terminal value as of December 31, 2020
Selected public companies (10)
McKesson Corporation · Patterson Companies, Inc. · Cardinal Health, Inc. · Owens & Minor Inc. · Amerisource Bergen Corporation · PharMerica Corporation · Henry Schein Inc. · Almost Family, Inc. · Addus HomeCare, Inc. · U.S. Physical Therapy, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2015E EBITDA (Healthcare Distribution peers) | 10.0x | 10.6x | 19.3x | — | — |
| EV / CY2016E EBITDA (Healthcare Distribution peers) | 8.8x | 9.4x | 14.4x | — | — |
| EV / CY2015E EBITDA (Small Cap Healthcare Services peers) | 8.5x | 11.1x | 14.5x | — | — |
| EV / CY2016E EBITDA (Small Cap Healthcare Services peers) | 6.8x | 9.1x | 13.3x | — | — |
| EV / CY2015E EBITDA (applied to Liberator) | — | — | — | 9.2x–16.9x | $2.39–$4.26 |
| EV / CY2016E EBITDA (applied to Liberator) | — | — | — | 7.8x–13.9x | $2.40–$4.18 |
| P / CY2015E EPS (Healthcare Distribution peers) | 15.1x | 20.0x | 26.4x | — | — |
| P / CY2016E EPS (Healthcare Distribution peers) | 13.7x | 16.7x | 23.7x | — | — |
| P / CY2015E EPS (Small Cap Healthcare Services peers) | 19.3x | 19.5x | 30.0x | — | — |
| P / CY2016E EPS (Small Cap Healthcare Services peers) | 15.5x | 16.9x | 26.7x | — | — |
| P / CY2015E EPS (applied to Liberator) | — | — | — | 17.2x–28.2x | $2.48–$4.06 |
| P / CY2016E EPS (applied to Liberator) | — | — | — | 14.6x–25.2x | $2.52–$4.35 |
| EV / CY2015E Cash EBITDA (informational) | — | — | — | 9.2x–16.9x | $1.73–$3.05 |
| EV / CY2016E Cash EBITDA (informational) | — | — | — | 7.8x–13.9x | $1.93–$3.33 |
Selected precedent transactions (13)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-07-01 | Patterson Medical Supply Inc. | Madison Dearborn Partners, LLC | — |
| 2015-05-20 | Omnicare Inc. | CVS Health Corp. | — |
| 2015-01-11 | MWI Veterinary Supply, Inc. | AmerisourceBergen Corporation | — |
| 2012-10-24 | PSS World Medical, Inc. | McKesson Corporation | — |
| 2012-07-01 | Lincare Holdings Inc. | Linde AG | — |
| 2012-06-30 | Mediq NV | Advent International Corporation | — |
| 2011-10-24 | Futuremed Healthcare Products Corp. | Cardinal Health Canada Inc. | — |
| 2011-03-14 | Animal Health International Inc. | Lextron Inc. | — |
| 2010-11-01 | US Oncology Inc. | McKesson Corporation | — |
| 2010-10-14 | Provet Holdings Limited | Henry Schein Inc. | — |
| 2007-07-02 | Option Care Inc. | Walgreen Co. | — |
| 2007-05-02 | VWR International, Inc. | Madison Dearborn Partners, LLC | — |
| 2006-05-07 | Fisher Scientific International Inc. | Thermo Electron Corp. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | 7.5x | 10.7x | 18.5x | 7.5x–18.5x | $2.04–$4.83 |
| EV / LTM Cash EBITDA (informational) | — | — | — | 7.5x–18.5x | $1.40–$3.23 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Premiums Paid Analysis (1-day) | 46 U.S. healthcare services M&A transactions with transaction values of $100 million to $2 billion; 1-day premiums: bottom quartile 17.7%, two middle quartiles 30.0%, top quartile 38.6%. Applied 17.7%-38.6% to the November 18, 2015 closing price. | $2.94–$3.47 |
| Premiums Paid Analysis (1-week, informational) | 1-week premiums: bottom quartile 16.4%, middle 28.2%, top quartile 39.9%; applied 16.4%-39.9% to the November 11, 2015 closing price. | $3.05–$3.67 |
| Premiums Paid Analysis (1-month, informational) | 1-month premiums: bottom quartile 14.7%, middle 31.4%, top quartile 43.4%; applied 14.7%-43.4% to the October 19, 2015 closing price. | $3.04–$3.80 |
| Historical Stock Price Review | Reviewed current and historical market prices of Liberator Common Stock and of selected publicly traded comparable companies. | — |
Aggregate fee of approximately $1.84 million; $250,000 payable upon rendering of the opinion and approximately $1.59 million contingent upon consummation of the merger; plus expense reimbursement and indemnity. Engagement letter dated August 17, 2014. In the past two years JMP provided no other services to Liberator or Bard for compensation.
3,000+ healthcare deal-level valuation multiples
The Valuation database includes financial details for more than 3,000 healthcare M&A transactions, private and public, with deal-level multiples, categorized by segment, type, and year.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $97.9M | $107M | $116M | $127M | 9.0% |
| Revenue growth | 8.9% | 9.0% | 9.0% | 9.0% | |
| EBITDA | $17.7M | $19.5M | $21.6M | $23.8M | 10.4% |
| EBITDA growth | 12.7% | 10.2% | 10.8% | 10.2% | |
| EBITDA margin | 18% | 18% | 19% | 19% | |
| Implied EV / EBITDA | 10.2x | 9.3x | 8.4x | 7.6x |
Year-1 growth is against LTM at announcement ($89.9M revenue, $15.7M EBITDA); later years are year over year.
Liberator management provided JMP Securities with five-year projections on October 27, 2015 (CY2016E-CY2020E) prepared for internal use. Total revenue grows from $89.9 million in CY2016E (9.1% growth) to $126.8 million in CY2020E (9.0% growth), with EBITDA rising from $15.7 million (17.5% margin) to $23.8 million (18.8% margin). Gross profit goes from $54.9 million to $78.8 million; the filing also references a "Cash EBITDA" measure used in informational analyses.
Process notes
Single financial advisor (JMP Securities LLC) rendered the opinion to the full Liberator board on November 19, 2015; no special committee. Nevada corporation - no dissenter's/appraisal rights available. CEO/president and CFO entered into a voting and support agreement covering approximately 38% of outstanding shares. Termination fee of $7.2 million (~4.0% of equity value) after negotiation down from Bard's initial request of 5% (~$9 million) then 4.5% (~$8.1 million); expense reimbursement capped at $2 million. Bard's obligation is not subject to a financing condition. Multiple stockholder complaints alleging breach of fiduciary duty were filed, including the Cherner complaint alleging the December 14, 2015 Schedule 14A was materially misleading. Board declared a dividend of up to $0.0325 per share payable in addition to the merger consideration. Equity value of ~$180 million is derived from the filing's statement that the $7.2 million fee equals approximately 4.0% of the equity value of the transaction.
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All Medical Devices and Supplies opinions → · JMP Securities opinions