MEDTOX Scientific acquired by Laboratory Corporation of America: fairness opinion by Lazard Middle Market
Deal terms
Implied value per share by method vs. $27.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Lazard Middle Market to the target board
Discounted cash flow assumptions
Standalone unlevered after-tax free cash flows for the second half of fiscal year ending December 31, 2012 through full fiscal year ending December 31, 2016; terminal value from applying perpetuity growth rates to FY2016 projected unlevered free cash flow.
Selected public companies (5)
Alere Inc. · Bio-Reference Laboratories, Inc. · Laboratory Corporation of America Holdings · Quest Diagnostics Incorporated · Sonic Healthcare Limited
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (as of March 31, 2012) | 6.9x | 7.9x | 10.7x | 6.9x–10.7x | — |
| EV / CY2012E EBITDA | 5.9x | 7.8x | 9.9x | 5.9x–9.9x | — |
| Combined LTM and CY2012E EBITDA multiples - overall implied per share range | — | — | — | — | $12.34–$21.13 |
Selected precedent transactions (10)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2012-02-28 | eScreen, Inc. | Alere Inc. | — |
| 2011-04-06 | Orchid Cellmark Inc. | Laboratory Corporation of America Holdings | — |
| 2010-08-12 | Bode Technology Group, Inc. | SolutionPoint International, Inc. | — |
| 2009-06-23 | Monogram Biosciences, Inc. | Laboratory Corporation of America Holdings | — |
| 2009-06-05 | Concateno plc | Alere Inc. (f/k/a Inverness Medical Innovations, Inc.) | — |
| 2008-06-30 | Clinical Laboratories of Hawaii, LLP | Sonic Healthcare Limited | — |
| 2007-12-20 | Redwood Toxicology Laboratory, Inc. | Alere Inc. (f/k/a Inverness Medical Innovations, Inc.) | — |
| 2007-07-06 | Sunrise Medical Laboratories, Inc. | Sonic Healthcare Limited | — |
| 2005-08-23 | Clinical Pathology Laboratories, Inc. | Sonic Healthcare Limited | — |
| 2005-08-08 | LabOne, Inc. | Quest Diagnostics Incorporated | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 1.1x | 1.9x | 3.2x | 1.1x–3.2x | — |
| EV / One-year forward Revenue | 1.0x | 1.4x | 2.2x | 1.0x–2.2x | — |
| Revenue multiples - overall implied per share range | — | — | — | — | $13.23–$38.06 |
| EV / LTM EBITDA | 7.4x | 9.3x | 13.6x | 7.4x–13.6x | — |
| EV / One-year forward EBITDA | 7.6x | 8.9x | 19.4x | 7.6x–19.4x | — |
| EBITDA multiples - overall implied per share range | — | — | — | — | $13.14–$40.74 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Premiums Paid (informational only) | Reviewed implied premiums paid in selected healthcare M&A transactions announced January 1, 2009 through May 31, 2012: one trading day premiums of approximately 5.5% to 90.1% and one month premiums of approximately 15.1% to 100.6%. The $27.00 per share consideration implied premiums of approximately 33.6% (one day) and 22.2% (one month). Referenced for informational purposes and not considered part of LMM's financial analyses. | — |
| Historical Stock Price/Trading Volume Review | LMM reviewed historical stock prices and trading volumes of Company common stock as part of its review; no implied per share range disclosed. | — |
Aggregate fee currently estimated at approximately $5.4 million, portions of which were payable in connection with LMM's engagement and upon rendering of the opinion, and approximately $5.1 million contingent upon consummation of the merger. Lazard affiliates previously received approximately $3.5 million in fees from LabCorp for advising on a 2010 acquisition.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $134M | $149M | $167M | $185M | 11.5% |
| Revenue growth | 12.6% | 11.9% | 11.5% | 11.1% | |
| EBITDA | $25.1M | $32.2M | $40.4M | $49.6M | 25.5% |
| EBITDA growth | 32.1% | 28.3% | 25.5% | 22.8% | |
| EBITDA margin | 19% | 22% | 24% | 27% | |
| Implied EV / EBITDA | 9.6x | 7.5x | 6.0x | 4.9x |
Year-1 growth is against LTM at announcement ($119M revenue, $19.0M EBITDA); later years are year over year.
LMM used various financial forecasts provided by the Company (internal estimates of the Company's management), covering the second half of fiscal year ending December 31, 2012 through the full fiscal year ending December 31, 2016, for its discounted cash flow analysis of standalone unlevered after-tax free cash flows. Company LTM (as of March 31, 2012) and calendar year 2012 estimated revenue and EBITDA, based on public filings and management internal estimates, were used in the selected companies and precedent transactions analyses. No specific revenue or EBITDA dollar figures were disclosed in the sliced sections.
Process notes
Other Diagnostics / Life Sciences fairness opinions
- Gen-Probe / Hologic 2012 · 16.1x EV/EBITDA
- Beckman Coulter / Danaher 2011 · 8.4x EV/EBITDA
- Genoptix / Novartis AG 2011 · 11.0x EV/EBITDA
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Dionex / Thermo Fisher Scientific 2010 · 17.8x EV/EBITDA
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
All Diagnostics / Life Sciences opinions → · Lazard Middle Market opinions