NxStage Medical acquired by Fresenius Medical Care AG & Co. KGaA: fairness opinion by Piper Sandler
Announced August 7, 2017 · One-step merger · All cash ·
DEFM14A filed September 22, 2017
Medical Devices and Supplies Medical Devices
Enterprise value
$1.9B
EV / LTM EBITDA
29.7x
EBITDA $65.0M · 13% margin
EV / LTM revenue
3.96x
revenue $487M
DCF discount rate
10.5%–12.5%
Deal terms
ConsiderationAll cash
Price per share$30.00
Premium30.0%
Premium basisclosing price of $23.14 on August 4, 2017, the last trading day prior to announcement
StructureOne-step merger
Termination fee$60.0M
Reverse termination fee$100M
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Opinion of Piper Sandler to the target board
Delivered August 5, 2017
Discounted cash flow assumptions
Discount rate—
BasisWACC
Terminal value—
Perpetuity growth—
Exit multiple—
Projection period—
Projections usedNxStage management projections
Implied value per share—
Piper Jaffray conducted a discounted cash flow analysis on NxStage based on projections prepared by NxStage management; detailed assumptions not included in the sliced sections.
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Analysis | Reviewed historical closing prices and trading volumes over the one-year period ended August 4, 2017. Premiums implied by the $30.00 merger consideration: 30% to the August 4, 2017 close of $23.14; 30% to the August 3, 2017 close of $23.13; 27% to the July 28, 2017 close of $23.65; 20% to the July 7, 2017 close of $25.06; and (3)% to the 52-week high of $30.80 (May 2, 2017). | $23.13–$30.80 |
| Selected Public Companies Analysis | Piper Jaffray compared NxStage's financial performance with that of certain other publicly-traded companies it deemed relevant; the specific companies and multiples were not included in the sliced sections. | — |
| Selected Precedent Transactions Analysis | Piper Jaffray reviewed the publicly available financial terms of certain business combination transactions it deemed relevant; the specific transactions and multiples were not included in the sliced sections. | — |
3,000+ healthcare deal-level valuation multiples
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $594M | $729M | $852M | $978M | $1.1B | 17.1% |
| Revenue growth | 22.0% | 22.7% | 16.9% | 14.8% | 14.0% | |
| EBITDA | $100M | $148M | $193M | $237M | $284M | 29.8% |
| EBITDA growth | 53.8% | 48.0% | 30.4% | 22.8% | 19.8% | |
| EBITDA margin | 17% | 20% | 23% | 24% | 25% | |
| Implied EV / EBITDA | 19.3x | 13.0x | 10.0x | 8.1x | 6.8x |
Year-1 growth is against LTM at announcement ($487M revenue, $65.0M EBITDA); later years are year over year.
Piper Jaffray conducted its discounted cash flow analysis using financial forecasts prepared by NxStage management and furnished to it, supplemented by publicly available financial information. The specific projection years and revenue/EBITDA figures were not included in the sliced sections of the filing.
Process notes
All-cash one-step merger; NxStage stockholders were to receive $30.00 per share. Piper Jaffray & Co. was the sole financial advisor to the NxStage board and delivered a written fairness opinion dated August 5, 2017 (Annex B). BofA Merrill Lynch acted for Fresenius but no acquirer-side fairness opinion is described. A Transaction Committee of the NxStage board participated in the process; the board decided not to conduct a pre-signing market check based on management's and Piper Jaffray's view that no other party would pay $30.00+ per share. Negotiations over termination fees were framed as percentages of NxStage enterprise value (3% target fee / 5% reverse fee), ultimately $60 million and $100 million respectively. For valuation purposes Piper Jaffray used NxStage debt of approximately $14 million and cash of approximately $63 million as of June 30, 2017. Per share consideration also represented ~18% premium to the 180-day VWAP and ~19% premium to the 1-year VWAP ended August 4, 2017.
Other Medical Devices and Supplies fairness opinions
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- Entellus Medical / StrykerCorp. 2017
- Spectranetics / Philips 2017
- Miramar Labs / Sientra 2017
- ZELTIQ Aesthetics / Allergan 2017 · 32.9x EV/EBITDA
- C. R. Bard / Becton Dickinson 2017 · 20.1x EV/EBITDA
All Medical Devices and Supplies opinions → · Piper Sandler opinions