SonoSite acquired by FUJIFILM Holdings: fairness opinion by J.P. Morgan
Deal terms
Implied value per share by method vs. $54.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of J.P. Morgan to the target board
Discounted cash flow assumptions
Implied equity value per share of $56.25-$73.75 under Management Case 1, $38.50-$49.25 under Management Case 2 and $24.25-$32.50 under Management Case 3. Terminal values calculated as of September 30, 2011 using perpetual revenue growth rates of 1.5%-2.5%; enterprise value adjusted for net debt (assuming convertible debt converts at $38.20) and cash as of September 30, 2011.
Selected public companies (8)
ArthroCare Corporation · Given Imaging Ltd. · ICU Medical, Inc. · Masimo Corporation · Merit Medical Systems, Inc. · STERIS Corporation · Volcano Corporation · Zoll Medical Corporation
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2012E Revenue | — | 1.9x | — | 1.5x–2.5x | $31.75–$54.25 |
| EV / 2012E EBITDA | — | 7.9x | — | 8.0x–15.0x | $15.25–$50.75 |
| P / 2012E EPS | — | 16.6x | — | 12.0x–25.0x | $10.75–$47.50 |
Selected precedent transactions (11)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2011-10 | Atrium Medical Corporation | Getinge AB | — |
| 2011-06 | Nucletron BV | Elekta AB | — |
| 2011-05 | Orthovita, Inc. | Stryker Corporation | — |
| 2011-03 | TomoTherapy, Inc. | Accuray, Inc. | — |
| 2010-04 | Medegen, Inc. | CareFusion Corporation | — |
| 2009-10 | I-Flow Corporation | Kimberly-Clark Corporation | — |
| 2009-09 | Aspect Medical Systems, Inc. | Covidien plc | — |
| 2009-05 | VNUS Medical Technologies, Inc. | Covidien plc | — |
| 2008-09 | Datascope Corp | Getinge AB | — |
| 2007-12 | Respironics, Inc. | Koninklijke Philips Electronics N.V. | — |
| 2007-05 | VIASYS Healthcare Inc. | Cardinal Health, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | — | 2.9x | — | 2.0x–3.5x | $38.25–$62.75 |
| EV / LTM EBITDA (excludes stock based compensation) | — | 18.7x | — | 10.0x–30.0x | $25.00–$70.75 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Transaction Overview / Premiums Analysis | Noted, for reference only, that the $54.00 Offer Price represented premiums of 75.4% to the $30.78 closing price on November 2, 2011 (last trading day before the rumored-sale article), 26.4% to the $42.73 closing price on December 12, 2011, 69.8% to the 30-day average through November 2, 2011, 64.1% to the 180-day average through November 2, 2011, and 44.3% to the highest closing price during the 52-week period ending November 2, 2011. Enterprise value was approximately $498 million at the $30.78 price and approximately $927 million at the $54.00 Offer Price. | — |
Engagement letter dated October 11, 2011: $1,000,000 fee due upon delivery of the opinion and execution of the Merger Agreement, creditable against the transaction fee, plus an additional fee equal to 1.40% of total consideration payable upon consummation. J.P. Morgan received approximately $2.1 million in fees from FUJI for investment/commercial banking services in the prior two years and none from SonoSite; JPMorgan Chase Bank was counterparty to SonoSite's 2007 convertible bond hedge and warrant transactions, unwound December 16, 2011.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $447M | $530M | $613M | $702M | $795M | 15.5% |
| Revenue growth | 21.0% | 18.7% | 15.6% | 14.5% | 13.3% | |
| EBITDA | $85.7M | $119M | $144M | $172M | $204M | 24.1% |
| EBITDA growth | 81.6% | 39.1% | 20.8% | 19.4% | 18.4% | |
| EBITDA margin | 19% | 22% | 24% | 25% | 26% | |
| Implied EV / EBITDA | 11.6x | 8.3x | 6.9x | 5.8x | 4.9x |
Year-1 growth is against LTM at announcement ($369M revenue, $47.2M EBITDA); later years are year over year.
Company management prepared four sets of forecasts used by J.P. Morgan: a Street Case based on Wall Street consensus and three management cases (Management Case 1, 2 and 3) covering fiscal years 2011 through 2017, extended to 2021 for DCF purposes. Management did not assign any specific weighting to the scenarios and believed each was equally likely to occur. No headline revenue or EBITDA figures for the projection years are disclosed in the sliced sections.
Process notes
Other Medical Devices and Supplies fairness opinions
- Synthes / Johnson & Johnson 2011 · 9.6x EV/EBITDA
- Synovis Life Technologies / Baxter International 2011 · 17.1x EV/EBITDA
- American Medical Alert / Tunstall Healthcare Group 2011 · 8.5x EV/EBITDA
- Kinetic Concepts / Apax Partners, CPPIB and PSP Investments 2011 · 9.7x EV/EBITDA
- Orthovita / StrykerCorp. 2011 · 18.1x EV/EBITDA
- American Medical Systems / Endo Pharmaceuticals 2011 · 15.2x EV/EBITDA
All Medical Devices and Supplies opinions → · J.P. Morgan opinions