Solta Medical acquired by Valeant Pharmaceuticals International: fairness opinion by Piper Sandler
Announced December 16, 2013 · Tender offer · All cash ·
SC 14D9 filed December 23, 2013
Medical Devices and Supplies Medical Devices
Enterprise value
$293M
equity $250M
EV / LTM EBITDA
11.2x
EBITDA $26.0M · 16% margin
EV / LTM revenue
1.77x
revenue $165M
DCF discount rate
19.6%–23.6%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$2.92
Premium41.0%
Premium basisclosing price per Share of $2.07 on December 12, 2013 (1 day prior); 60% premium to undisturbed closing price of $1.83 on November 11, 2013
StructureTender offer
Termination fee$8.8M (3.5% of equity)
Reverse termination fee—
Go-shopNone
Outside date—
FilingSC 14D9 · EDGAR index
Implied value per share by method vs. $2.92 offer
Selected companies — Aesthetics peers: implied equity value per diluted Share (max/min mean-median) $1.32 – $3.23
Selected companies — Medtech financial profile peers: implied equity value per diluted Share (max/min mean-median) $1.81 – $2.07
Precedent transactions — Aesthetics transactions: implied equity value per diluted Share (max/min mean-median) $1.75 – $2.57
Precedent transactions — Medtech financial profile transactions: implied equity value per diluted Share (max/min mean-median) $0.93 – $3.54
Discounted cash flow $2.29 – $2.96
Historical Trading Analysis $1.75 – $2.78
Premiums Paid Analysis $2.43 – $2.94
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Piper Sandler to the target board
Delivered December 14, 2013 · Fee $4.7M ($4.2M contingent on closing), $0.5M on delivery of the opinion
Discounted cash flow assumptions
Discount rate19.6%–23.6%
BasisCompany's weighted average cost of capital; cost of equity = equity risk premium x five-year daily adjusted beta, plus size premium, plus risk free rate (20-year U.S. Treasury Coupon Bond Yield)
Terminal valueExit multiple
Perpetuity growth—
Exit multiple8.0x–9.0x projected 2018 EBITDA
Projection period2013E-2018E
Projections usedCompany management projections
Implied value per share$2.29–$2.96
Free cash flows from December 31, 2013 to December 31, 2018 discounted back to December 31, 2013; taxes at assumed 35% marginal rate after utilization of $93 million in net operating losses.
Selected public companies (8)
Cutera, Inc. · Cynosure, Inc. · PhotoMedex, Inc. · Syneron Medical Ltd. · ZELTIQ Aesthetics, Inc. · Alphatec Holdings, Inc. · CryoLife Inc. · Exactech Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Aesthetics peers: EV / CY2013E revenue | 0.6x | 1.1x | 6.4x | — | — |
| Aesthetics peers: EV / CY2014E revenue | 0.5x | 1.0x | 5.4x | — | — |
| Aesthetics peers: EV / CY2013E gross profit | 1.0x | 2.0x | 9.2x | — | — |
| Aesthetics peers: EV / CY2014E gross profit | 0.9x | 1.9x | 7.5x | — | — |
| Aesthetics peers: EV / CY2013E EBITDA | 5.7x | 9.6x | 13.5x | — | — |
| Aesthetics peers: EV / CY2014E EBITDA | 4.7x | 9.0x | 12.2x | — | — |
| Aesthetics peers: implied equity value per diluted Share (max/min mean-median) | — | — | — | — | $1.32–$3.23 |
| Medtech financial profile peers: EV / CY2013E revenue | 1.1x | 1.4x | 2.0x | — | — |
| Medtech financial profile peers: EV / CY2014E revenue | 1.0x | 1.3x | 1.8x | — | — |
| Medtech financial profile peers: EV / CY2013E gross profit | 1.9x | 2.2x | 3.1x | — | — |
| Medtech financial profile peers: EV / CY2014E gross profit | 1.7x | 2.0x | 2.8x | — | — |
| Medtech financial profile peers: EV / CY2013E EBITDA | 8.8x | 10.3x | 11.7x | — | — |
| Medtech financial profile peers: EV / CY2014E EBITDA | 7.9x | 8.3x | 8.7x | — | — |
| Medtech financial profile peers: implied equity value per diluted Share (max/min mean-median) | — | — | — | — | $1.81–$2.07 |
Selected precedent transactions (19)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2013-03-26 | Alma Lasers | Fosun Pharma | — |
| 2013-03-18 | Palomar | Cynosure | — |
| 2013-01-29 | Sound Surgical | Solta Medical | — |
| 2012-11-08 | DUSA Pharmaceuticals | Sun Pharma | — |
| 2011-06-28 | HOYA ConBio | Cynosure | — |
| 2009-09-09 | Candela Corporation | Syneron Medical | — |
| 2008-07-07 | Reliant Technologies | Thermage | — |
| 2006-11-30 | Laserscope (Aesthetics Business) | IRIDEX | — |
| 2006-03-23 | Alma Lasers | TA Associates | — |
| 2005-06-13 | TuiLaser AG | Coherent Inc. | — |
| 2001-02-26 | Coherent Medical Group | ESC Medical Systems | — |
| 2013-03-20 | Obagi Medical Products, Inc. | Valeant Pharmaceuticals | — |
| 2013-03-18 | Palomar Medical Technologies, Inc. | Cynosure, Inc. | — |
| 2012-02-24 | BREG, Inc. | Water Street Healthcare Partners | — |
| 2011-11-27 | Physio-Control, Inc. | Bain Capital | — |
| 2010-08-17 | Osteotech Inc. | Medtronic Inc. | — |
| 2010-04-29 | ATS Medical Inc. | Medtronic Inc. | — |
| 2010-01-04 | BioForm Medical, Inc. | Merz Pharma Group | — |
| 2009-10-08 | I-Flow Corporation | Kimberly-Clark Corporation | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Aesthetics transactions: EV / LTM revenue | 0.3x | 1.3x | 4.7x | — | — |
| Aesthetics transactions: EV / FTM revenue | 0.3x | 1.6x | 3.2x | — | — |
| Aesthetics transactions: implied equity value per diluted Share (max/min mean-median) | — | — | — | — | $1.75–$2.57 |
| Medtech financial profile transactions: EV / LTM revenue | 1.1x | 2.2x | 4.6x | — | — |
| Medtech financial profile transactions: EV / FTM revenue | 1.0x | 2.0x | 4.2x | — | — |
| Medtech financial profile transactions: EV / LTM EBITDA | 17.3x | 18.8x | 20.2x | — | — |
| Medtech financial profile transactions: implied equity value per diluted Share (max/min mean-median) | — | — | — | — | $0.93–$3.54 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Analysis | Reviewed closing prices/volumes for the one-year period ended December 13, 2013: closing price $2.09 (12/13/13), 30 trading day average $1.98, 180 trading day average $2.14, one-year high $2.78 (1/4/13), one-year low $1.75 (5/7/13), versus Offer Price of $2.92. | $1.75–$2.78 |
| Premiums Paid Analysis | 42 selected public medical technology M&A transactions announced since January 1, 2009 with EV > $50 million; 1-day premiums ranged from 6% (low) to 172% (high), median 33%, mean 42%. Offer Price implied a 60% premium to the undisturbed price of $1.83 (11/11/13) and 41% to the $2.07 close (12/12/13). Implied equity values per diluted share of $2.43 to $2.94. | $2.43–$2.94 |
Estimated fee of approximately $4.7 million, contingent upon consummation of the Offer, except for $500,000 opinion fee already paid and credited against the total fee; opinion fee not contingent on consummation or conclusions.
3,000+ healthcare deal-level valuation multiples
The Valuation database includes financial details for more than 3,000 healthcare M&A transactions, private and public, with deal-level multiples, categorized by segment, type, and year.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $182M | $197M | $217M | $238M | 9.4% |
| Revenue growth | 10.3% | 8.2% | 10.2% | 9.7% | |
| EBITDA | $33.0M | $40.0M | $49.0M | $60.0M | 22.1% |
| EBITDA growth | 26.9% | 21.2% | 22.5% | 22.4% | |
| EBITDA margin | 18% | 20% | 23% | 25% | |
| Implied EV / EBITDA | 8.9x | 7.3x | 6.0x | 4.9x |
Year-1 growth is against LTM at announcement ($165M revenue, $26.0M EBITDA); later years are year over year.
Piper Jaffray used the Company's management internal financial projections for the quarter ended December 31, 2013 and the five fiscal years ending December 31, 2018, covering revenue, gross profit and EBITDA. These projections supported the DCF (free cash flows December 31, 2013 to December 31, 2018, taxed at an assumed 35% marginal rate after utilization of $93 million of NOLs) and the Company-side multiples in the comparable company and transaction analyses. Specific revenue/EBITDA dollar figures were not disclosed in the sections provided.
Process notes
Single financial advisor (Piper Jaffray) to the full Board; no special committee. Negotiations moved price from $2.90 to a 'best and final' $2.95 discussed with a 3.5% termination fee; final Offer Price was $2.92 per Share with an $8.75 million termination fee (~3.5% of equity value). Tender agreements covering ~7.6% of Shares were signed by all directors and certain officers. Piper Jaffray had not been paid any fees by Valeant or the Company in the prior five years.
Other Medical Devices and Supplies fairness opinions
- Rochester Medical / C. R. Bard 2013 · 13.1x EV/EBITDA
- Theragenics / Juniper Investment 2013 · 9.6x EV/EBITDA
- Conceptus / Bayer HealthCare 2013 · 28.0x EV/EBITDA
- CareFusion / Becton Dickinson 2014 · 13.0x EV/EBITDA
- Covidien / Medtronic 2014 · 17.5x EV/EBITDA
- Symmetry Medical OEMS Business / Tecomet 2014 · 8.5x EV/EBITDA
All Medical Devices and Supplies opinions → · Piper Sandler opinions