Pall acquired by Danaher: fairness opinion by Goldman Sachs
Announced May 13, 2015 · One-step merger · All cash ·
DEFM14A filed June 26, 2015
Diagnostics / Life Sciences Equipment / Supplies
Enterprise value
$14B
EV / LTM EBITDA
20.5x
EBITDA $663M · 24% margin
EV / LTM revenue
4.88x
revenue $2.8B
DCF discount rate
9.0%–11.0%
Perpetuity growth
Deal terms
ConsiderationAll cash
Price per share$127.20
Premium28.1%
Premium basisclosing share price on May 11, 2015, last completed trading day prior to media reports of a pending transaction
StructureOne-step merger
Termination fee$423M
Reverse termination fee—
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $127.20 offer
Precedent transactions — EV / LTM EBITDA $74.00 – $122.00
Precedent transactions — One day premium to undisturbed price (all-cash deals $10-15bn, last ten years) $115.00 – $132.00
Discounted cash flow $73.00 – $113.00
Present Value of Future Stock Price Analysis $80.00 – $107.00
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Delivered May 12, 2015 · Fee $50.5M ($50.5M contingent on closing)
Discounted cash flow assumptions
Discount rate9.0%–11.0%
Basisestimate of Pall's weighted average cost of capital
Terminal valuePerpetuity growth
Perpetuity growth3.0%–4.0%
Exit multiple—
Projection periodApril 30, 2015 through FY2020 (fiscal year ended July 31, 2020)
Projections usedPall management Forecasts
Implied value per share$73.00–$113.00
Discounted to present value as of April 30, 2015; net debt as of April 30, 2015 subtracted from illustrative enterprise values.
Selected precedent transactions (16)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2010-12-13 | Dionex Corporation | Thermo Fisher Scientific Inc. | 20.5x EV / LTM EBITDA |
| 2014-09-22 | Sigma-Aldrich Corporation | Merck KGaA | 19.8x EV / LTM EBITDA |
| 2015-02-23 | Polypore International, Inc. | Asahi Kasei Corporation | 18.9x EV / LTM EBITDA |
| 2010-02-28 | Millipore Corporation | Merck KGaA | 17.4x EV / LTM EBITDA |
| 2013-04-15 | Life Technologies Corporation | Thermo Fisher Scientific Inc. | 13.2x EV / LTM EBITDA |
| 2008-06-12 | Applied Biosystems Group | Invitrogen Corporation | 12.9x EV / LTM EBITDA |
| 2009-07-27 | Varian Inc. | Agilent Technologies Inc. | 12.1x EV / LTM EBITDA |
| 2006-02-27 | KeySpan Corp | National Grid PLC | 0.2x One day premium (selected transactions premia analysis) |
| 2006-06-27 | Univision Communications Inc. | Umbrella Holdings LLC | 0.2x One day premium (selected transactions premia analysis) |
| 2007-04-23 | MedImmune Inc. | AstraZeneca PLC | 0.2x One day premium (selected transactions premia analysis) |
| 2008-05-13 | Electronic Data Systems Corp | Hewlett Packard Co | 0.3x One day premium (selected transactions premia analysis) |
| 2008-09-08 | UST Inc | Altria | 0.3x One day premium (selected transactions premia analysis) |
| 2013-05-29 | NV Energy Inc | MidAmerican Energy / Berkshire Hathaway | 0.2x One day premium (selected transactions premia analysis) |
| 2014-04-30 | Pepco Holding Inc | Exelon Corp | 0.2x One day premium (selected transactions premia analysis) |
| 2014-07-10 | TRW Automotive Holdings Corp | ZF Friedrichshafen AG | 0.2x One day premium (selected transactions premia analysis) |
| 2015-03-30 | Catamaran Corp | UnitedHealth Group Inc | 0.3x One day premium (selected transactions premia analysis) |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | 12.1x | 17.4x | 20.5x | 12.0x–20.0x | $74.00–$122.00 |
| One day premium to undisturbed price (all-cash deals $10-15bn, last ten years) | 0.2x | 0.2x | 0.3x | 0.2x–0.3x | $115.00–$132.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Implied Premia and Multiple Analysis | $127.20 represented a 28.1% premium to the May 11, 2015 closing price and a 39.8% premium to the 12-month VWAP; the May 11, 2015 closing price exceeded the 12-month VWAP by 9.1%. Implied multiples at $127.20: 20.8x LTM EBITDA, 21.2x FY2015E EBITDA (management), 21.3x FY2015E EBITDA (IBES), 34.8x FY2015E EPS (management), 34.4x FY2015E EPS (IBES); versus 16.2x, 16.5x, 16.6x, 27.1x and 26.8x respectively based on the May 11, 2015 closing price. | — |
| Present Value of Future Stock Price Analysis | Applied illustrative P/E multiples of 20x to 25x to management's estimates of Pall's next-fiscal-year EPS to derive theoretical future share values as of FYE 2015, 2016 and 2017, discounted to April 30, 2015 at a 10.4% cost of equity, together with estimated dividends. | $80.00–$107.00 |
Transaction fee determined based on value of consideration paid to Pall shareholders; based on $127.20 per share, approximately $50.5 million, all contingent upon consummation. Expense reimbursement and indemnity also provided. Engagement letter dated May 11, 2015.
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 | $2.9B | $3.1B | $3.3B | $3.5B | $3.7B | 5.9% |
| Revenue growth | 5.6% | 6.0% | 6.2% | 5.7% | 5.7% | |
| EBITDA | $732M | $800M | $879M | $947M | $1.0B | 8.4% |
| EBITDA growth | 10.4% | 9.3% | 9.9% | 7.7% | 6.7% | |
| EBITDA margin | 25% | 26% | 27% | 27% | 27% | |
| Implied EV / EBITDA | 18.6x | 17.0x | 15.5x | 14.4x | 13.5x |
Year-1 growth is against LTM at announcement ($2.8B revenue, $663M EBITDA); later years are year over year.
Pall management prepared forecasts for fiscal years ending July 31, 2015E through 2020E, provided to Danaher, the Pall board and Goldman Sachs. Net sales grow from $2,789 million in FY2015E to $3,704 million in FY2020E (5.8% CAGR); EBIT from $547 million to $903 million (10.5% CAGR); EBITDA from $663 million (23.8% margin) to $1,010 million (27.3% margin), an 8.8% CAGR. Management later delivered updated FY2015 estimates of net sales $2,781 million, gross profit $1,436 million and EBIT $544 million.
Process notes
Single financial advisor (Goldman Sachs) to the Pall board; no special committee. Goldman Sachs performed no selected-companies (comparable companies) valuation range, only selected transactions, premia, present value of future stock price and DCF analyses. Competing bidder referred to as "Company A" participated in the process; initial Pall draft proposed a 2% termination fee and Danaher countered at 3.75%. Termination fee of $423,194,400 is Danaher's sole and exclusive remedy except for intentional breach. Shareholder approval requires two-thirds of outstanding shares (New York corporation).
Other Diagnostics / Life Sciences fairness opinions
- Clarient / NeoGenomics 2015 · 14.4x EV/EBITDA
- Bio-Reference Laboratories / Opko Health 2015 · 12.1x EV/EBITDA
- FEI / Thermo Fisher Scientific 2016 · 15.1x EV/EBITDA
- Sequenom / Laboratory Corporation of America 2016
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Advanced Accelerator Applications / Novartis 2017
All Diagnostics / Life Sciences opinions → · Goldman Sachs opinions