Sirona Dental Systems acquired by DENTSPLY: fairness opinion by Jefferies
Deal terms
Each share of Sirona common stock converted into 1.8142 shares of DENTSPLY common stock; Sirona holders to own approximately 41.93% of the combined company (DENTSPLY holders approximately 58.07%). Merger Sub: Dawkins Merger Sub Inc. merges into Sirona, with Sirona surviving as a wholly owned subsidiary of DENTSPLY.
Implied value per share by method
Ranges as disclosed in the banker’s summary of analyses.
Opinion of Jefferies to the target board
Discounted cash flow assumptions
Implied per share equity value reference range for Sirona of $100.17-$116.25 and for DENTSPLY of $54.99-$65.04; implied exchange ratio reference range of 1.5402x-2.1141x vs. 1.8142x exchange ratio; implied Sirona pro forma ownership 38.0%-45.7% vs. 41.93%. Present values as of December 31, 2015.
Selected public companies (15)
Align Technology, Inc. · DENTSPLY International Inc. · Straumann Holding AG · Cynosure, Inc. · Elekta AB · Hill-Rom Holdings, Inc. · Intuitive Surgical, Inc. · COLTENE Holding AG · Sirona Dental Systems, Inc. · AngioDynamics, Inc. · Becton, Dickinson and Company · Cantel Medical Corp. · C.R. Bard, Inc. · ICU Medical, Inc. · Teleflex Incorporated
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Sirona: EV / CY2015E EBITDA | 11.4x | 14.1x | 22.3x | 13.0x–15.0x | $86.74–$99.17 |
| Sirona: EV / CY2016E EBITDA | 9.8x | 13.4x | 18.9x | 12.5x–14.5x | $91.56–$105.25 |
| Sirona: EV / CY2017E EBITDA | 9.0x | 12.1x | 17.5x | 11.0x–13.0x | $88.12–$103.06 |
| Sirona: P / CY2015E EPS | 17.0x | 25.6x | 35.0x | 24.0x–27.0x | $97.95–$110.20 |
| Sirona: P / CY2016E EPS | 16.3x | 23.2x | 25.9x | 21.5x–24.5x | $95.92–$109.31 |
| Sirona: P / CY2017E EPS | 14.7x | 18.1x | 23.7x | 16.5x–19.5x | $81.68–$96.53 |
| DENTSPLY: EV / CY2015E EBITDA | 10.4x | 15.6x | 22.3x | 14.5x–16.5x | $55.77–$64.48 |
| DENTSPLY: EV / CY2016E EBITDA | 10.0x | 13.9x | 18.9x | 13.0x–15.0x | $51.77–$60.87 |
| DENTSPLY: EV / CY2017E EBITDA | 9.3x | 11.6x | 17.5x | 10.5x–12.5x | $43.93–$53.70 |
| DENTSPLY: P / CY2015E EPS | 17.9x | 23.9x | 35.0x | 22.5x–25.5x | $58.31–$66.08 |
| DENTSPLY: P / CY2016E EPS | 15.5x | 21.6x | 30.0x | 20.0x–23.0x | $56.25–$64.68 |
| DENTSPLY: P / CY2017E EPS | 14.7x | 18.8x | 27.6x | 17.5x–20.5x | $54.60–$63.96 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Implied Exchange Ratio Reference Ranges (Selected Public Companies) | Based on EBITDA multiples, implied exchange ratio range of 1.3453x-2.3458x; based on EPS multiples, 1.2770x-1.9433x, vs. exchange ratio of 1.8142x. Implied Sirona pro forma ownership of 34.9%-48.3% (EBITDA) and 33.7%-43.6% (EPS) vs. 41.93%. | — |
| Relative Contributions (informational) | Reviewed relative contributions of Sirona and DENTSPLY to combined company CY2015E and CY2016E EBITDA and net income; implied exchange ratio range 1.5620x-1.8232x vs. 1.8142x; Sirona contribution approximately 38.3%-42.1% vs. implied pro forma ownership of 41.93%. | — |
| Historical Exchange Ratio (informational) | Historical exchange ratios implied by low and high closing prices of Sirona vs. DENTSPLY common stock over the 52-week period prior to September 14, 2015 ranged from 1.5350x to 1.9611x vs. exchange ratio of 1.8142x; implied Sirona ownership range 37.9%-43.9%. | — |
| Pro Forma Financial Effects / Accretion-Dilution (informational) | Using 30-day VWAPs of approximately $98.36 (Sirona) and $54.14 (DENTSPLY) as of September 14, 2015: merger accretive to Sirona holders by ~7.3% (ex-synergies) / ~11.6% (with synergies) in CY2016 and ~7.0% / ~17.3% in CY2017; dilutive to DENTSPLY holders by ~(6.1%) / ~(2.4%) in CY2016 and ~(6.4%) / +2.6% in CY2017. | — |
| Illustrative Value Creation (informational) | Value creation analysis based on blended CY2016E P/E multiples indicated potential value creation of ~3.5% relative to September 14, 2015 closing prices; after taking into account PV of potential synergies net of costs, potential value creation for Sirona holders of ~9.2% relative to closing price and ~9.4% relative to DCF midpoint. | — |
Aggregate fee currently estimated at approximately $15 million, of which a portion was payable upon delivery of Jefferies' opinion and approximately $14 million is contingent upon consummation of the merger; plus expense reimbursement and indemnification.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $1.3B | $1.5B | $1.6B | $1.8B | 9.8% |
| Revenue growth | 11.4% | 9.9% | 10.0% | 9.5% | |
| EBITDA | $390M | $426M | $477M | $531M | 10.8% |
| EBITDA growth | 10.2% | 9.2% | 12.0% | 11.3% | |
| EBITDA margin | 29% | 29% | 29% | 30% | |
| Implied EV / EBITDA | 14.7x | 13.5x | 12.0x | 10.8x |
Year-1 growth is against LTM at announcement ($1.2B revenue, $354M EBITDA); later years are year over year.
Jefferies used the "Sirona forecasts" prepared by Sirona management and the "DENTSPLY forecasts" prepared by DENTSPLY management, as calendarized, covering calendar years 2015E through 2019E, along with management estimates of cost savings and revenue enhancement synergies from the merger. Unlevered after-tax free cash flows for CY2016-CY2019 were used in the DCF analyses, with terminal values based on FY2019E EBITDA exit multiples. EBITDA and net income were adjusted to exclude stock-based compensation, historical transaction amortization and certain one-time/non-recurring items. No headline revenue or EBITDA dollar figures were disclosed in this section.
Process notes
Other Medical Devices and Supplies fairness opinions
- Liberator Medical Holdings / C. R. Bard 2015 · 11.5x EV/EBITDA
- Sorin / Cyberonics / LivaNova 2015 · 12.3x EV/EBITDA
- Synergetics USA / Bausch Health Companies 2015 · 13.2x EV/EBITDA
- Thoratec / St. Jude Medical 2015 · 26.5x EV/EBITDA
- Vascular Solutions / Teleflex 2016 · 25.7x EV/EBITDA
- EndoChoice Holdings / Boston Scientific 2016
All Medical Devices and Supplies opinions → · Jefferies opinions