Synovis Life Technologies acquired by Baxter International: fairness opinion by Piper Sandler
Deal terms
Implied value per share by method vs. $28.00 offer
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
Discounted cash flow assumptions
Synovis segregated into base business and high-growth business (Veritas Collagen Matrix patch products and Orthopedic and Woundcare) with different discount rates blended by pro rata revenue contribution. Free cash flows = EBIT less taxes at 36% marginal rate, plus D&A, plus stock-based compensation, less capex, less increase in net working capital. Terminal revenue multiple range based on approximate range between mean and 75th percentile of LTM revenue multiples for selected public companies.
Selected public companies (8)
Align Technology Inc. · Cantel Medical Corp. · Masimo Corporation · Merit Medical Systems, Inc. · Natus Medical Inc. · SonoSite Inc. · Tornier N.V. · Volcano Corporation
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / projected CY2011 revenue | 0.9x | 2.3x | 4.0x | — | — |
| EV / projected CY2012 revenue | 0.8x | 2.1x | 3.5x | — | — |
| EV / projected CY2013 revenue | 0.8x | 2.0x | 3.2x | — | — |
| EV / projected CY2011 EBITDA | 7.0x | 13.2x | 23.8x | — | — |
| EV / projected CY2012 EBITDA | 5.5x | 10.8x | 18.1x | — | — |
| EV / projected CY2013 EBITDA | 4.4x | 10.2x | 12.4x | — | — |
| Selected public companies analysis - implied equity value per diluted share (mean/median range) | — | — | — | — | $23.04–$27.61 |
| Selected public companies analysis - implied equity value per diluted share (25th to 75th percentile range) | — | — | — | — | $18.95–$30.31 |
Selected precedent transactions (13)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2010-10-18 | AGA Medical | St. Jude Medical | — |
| 2010-07-12 | Micrus Endovascular | Johnson & Johnson | — |
| 2010-06-01 | ev3 | Covidien | — |
| 2010-02-03 | Home Diagnostics | Nipro | — |
| 2009-09-28 | Aspect Medical | Covidien | — |
| 2009-05-08 | VNUS | Covidien | — |
| 2008-04-07 | LifeCell | Kinetic Concepts | — |
| 2008-01-15 | Lifecore Biomedical | Warburg Pincus | — |
| 2006-01-19 | Lifeline Systems | Koninklijke Philips Electronics | — |
| 2005-07-28 | Royce Medical | Ossur | — |
| 2004-05-13 | Horizon Medical Products, Inc. | RITA Medical Systems | — |
| 2004-03-08 | Interpore International | Biomet | — |
| 2003-12-18 | Invivo Corporation | Intermagnetics General | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM revenue | 1.5x | 4.2x | 8.8x | — | — |
| EV / NTM revenue | 1.3x | 3.4x | 7.4x | — | — |
| EV / LTM EBITDA | 12.1x | 19.4x | 29.8x | — | — |
| EV / NTM EBITDA | 8.7x | 16.1x | 28.7x | — | — |
| Selected M&A transactions - implied equity value per diluted share (mean/median range) | — | — | — | — | $30.28–$35.30 |
| Selected M&A transactions - implied equity value per diluted share (25th to 75th percentile range) | — | — | — | — | $23.33–$38.89 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Analysis | Reviewed historical closing prices and trading volumes over the five-year period ended December 9, 2011: closing price on 12/9/2011 $18.72; one-day prior (12/8/2011) $17.88; 30-trading-day average $18.14; 60-day average $17.68; 90-day average $16.99; five-year high $24.43 (8/22/2008); five-year low $9.45 (12/11/2006). Indexed performance showed Synovis stock up 89% over five years vs. +18% for selected public companies and -13% for the S&P 500. | $9.45–$24.43 |
| Premiums Paid Analysis | Analyzed 61 medical device M&A transactions announced since January 1, 2003 with EV > $50 million. Observed 1-day premiums: low 5%, 25th 19%, median 31%, mean 41%, 75th 45%, high 259%; 1-week: low 2%, median 29%, mean 42%, high 277%; 4-week: low 10%, median 34%, mean 51%, high 308%. Implied premiums for Synovis at $28.00: 57% (1-day), 54% (1-week), 50% (4-week). Implied equity value per diluted share mean/median range $23.38-$28.16; 25th-75th percentile range $21.26-$28.57. | $21.26–$28.57 |
Estimated fee of approximately $2.9 million, contingent upon consummation of the merger, except for $500,000 paid for providing the fairness opinion, which is credited against the total fee. The opinion fee was not contingent on consummation or on the conclusions reached.
Management projections
Synovis management prepared five-year financial projections (FY2012-FY2016, fiscal year ending October 31) in connection with the FY2012 annual budget process; a version was provided to Baxter October 5, 2011 and a slightly adjusted October 20, 2011 version was provided to Piper Jaffray and used in its analyses. Revenue was projected to grow from $97.6 million in FY2012 to $216.9 million in FY2016, with EBIT of $13.8 million in FY2012 rising to $55.8-$55.9 million in FY2016 and gross profit from $71.1 million to $163.7 million. Piper Jaffray was also provided after-tax free cash flow projections (36% assumed marginal tax rate) of $8.7 million in FY2012 growing to $33.9 million in FY2016, with revenue split between the Veritas Collagen Matrix / Orthopedic and Woundcare high-growth business ($25.8 million to $92.6 million) and other business ($71.8 million to $124.3 million).
Process notes
Other Medical Devices and Supplies fairness opinions
- Synthes / Johnson & Johnson 2011 · 9.6x EV/EBITDA
- SonoSite / FUJIFILM Holdings 2011 · 21.1x 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 → · Piper Sandler opinions