Fairness opinions › Pharmacy / Infusion › 2015

Omnicare acquired by CVS Health: fairness opinion by Centerview Partners and BofA Securities

Announced May 21, 2015 · One-step merger · All cash · DEFM14A filed July 21, 2015

Pharmacy / Infusion Institutional Rx

Enterprise value

$12B

equity $11B

EV / LTM EBITDA

15.8x

EBITDA $787M · 12% margin

EV / LTM revenue

1.87x

revenue $6.6B

DCF discount rate

8.0%–9.5%

Deal terms

ConsiderationAll cash

Price per share$98.00

Premium—

Premium basis—

StructureOne-step merger

Termination fee$350M (3.3% of equity)

Reverse termination fee—

Go-shopNone

Outside dateMay 20, 2016

FilingDEFM14A · EDGAR index

Opinion of Centerview Partners to the target board

Delivered May 20, 2015

Selected public companies (11)

CVS Health Corporation · Walgreens Boots Alliance, Inc. · Express Scripts Holding Company · McKesson Corporation · Cardinal Health, Inc. · AmerisourceBergen Corporation · Henry Schein, Inc. · Patterson Companies, Inc. · Owens & Minor, Inc. · Diplomat Pharmacy, Inc. · PharMerica Corporation

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2015E EBITDA	9.1x	12.0x	14.3x	11.0x–13.5x	—
EV / CY2016E EBITDA	8.5x	11.1x	13.2x	10.0x–12.5x	—
P / CY2015E EPS	16.1x	19.2x	22.6x	17.0x–21.0x	—
P / CY2016E EPS	14.5x	16.7x	20.0x	15.5x–19.0x	—

Other analyses

Analysis	Summary	Implied per share
Selected Precedent Transactions Analysis (referenced)	Centerview compared certain proposed financial terms of the transaction with financial terms of certain other transactions it deemed relevant; specific transactions and multiples not included in the sliced text.	—

Opinion of BofA Securities to the target board

Delivered May 20, 2015

Selected public companies (11)

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2015E EBITDA	9.1x	12.0x	14.3x	11.0x–13.5x	—
EV / CY2016E EBITDA	8.5x	11.1x	13.2x	10.0x–12.5x	—
P / CY2015E EPS	16.1x	19.2x	22.6x	17.0x–21.0x	—
P / CY2016E EPS	14.5x	16.7x	20.0x	15.5x–19.0x	—

3,000+ healthcare deal-level valuation multiples

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	CAGR
Revenue	$7.2B	$8.0B	$9.0B	$10B	11.8%
Revenue growth	8.6%	11.4%	12.0%	11.9%
EBITDA	$846M	$911M	$982M	$1.1B	7.8%
EBITDA growth	7.5%	7.7%	7.8%	7.8%
EBITDA margin	12%	11%	11%	11%
Implied EV / EBITDA	14.7x	13.7x	12.7x	11.8x

Year-1 growth is against LTM at announcement ($6.6B revenue, $787M EBITDA); later years are year over year.

Omnicare management prepared five-year projections (2015E-2019E) in connection with the strategic alternatives review, furnished to the Omnicare Board, CVS and other bidders, and to BofA Merrill Lynch and Centerview for their financial analyses. Net sales grow from $6,643 million in 2015E to $10,070 million in 2019E; Adjusted EBITDA from $787 million to $1,059 million and Adjusted Operating Income from $674 million to $964 million. Net cash flows from operations were projected at $668 million in 2015E declining to $546 million in 2016E and rising to $605 million by 2019E; net income grows from $324 million to $517 million.

Process notes

Two financial advisors delivered opinions to the Omnicare Board on May 20, 2015 (BofA Merrill Lynch and Centerview); the proxy summarizes their financial analyses jointly as those of the "Financial Advisors." The sliced opinion section includes only the Centerview opinion narrative and the selected publicly traded companies analysis, so DCF, precedent transaction detail, implied per-share reference ranges and advisor fee amounts are not captured. Diplomat Pharmacy, Inc. was excluded from the multiple ranges. Termination fee of $350 million is stated as approximately 3.3% of the equity value of the transaction (implying roughly $10.6 billion equity value). Merger consideration amount was not restated in the provided sections.

Other Pharmacy / Infusion fairness opinions

PharMerica / KKR 2017 · 9.6x EV/EBITDA
CVS Health / Aetna 2017 · 7.2x EV/EBITDA
Diplomat Pharmacy / UnitedHealth Group 2019 · 12.1x EV/EBITDA
Walgreens / Sycamore Partners 2025 · 52.4x EV/EBITDA

All Pharmacy / Infusion opinions → · Centerview Partners opinions · BofA Securities opinions