Synthes acquired by Johnson & Johnson: fairness opinion by Credit Suisse
Deal terms
Aggregate merger consideration of CHF 159.00 per share, consisting of CHF 55.65 per share in cash (35%) and CHF 103.35 per share in Johnson & Johnson common stock (65%), subject to a 7% collar. Illustrative exchange ratio of 1.8295 based on VWAP of J&J shares of $63.41 for the three-day period ended April 21, 2011 (USD/CHF 0.8909); actual exchange ratio will not be greater than 1.9672 nor less than 1.7098.
Implied value per share by method
Ranges as disclosed in the banker’s summary of analyses.
Opinion of Credit Suisse to the target board
Selected public companies (7)
Boston Scientific Corporation · Johnson & Johnson · Medtronic, Inc. · Smith & Nephew plc · St. Jude Medical, Inc. · Stryker Corporation · Zimmer Holdings, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2011E EBITDA | 7.1x | — | 10.9x | 8.0x–9.0x | $109.00–$130.00 |
| P / CY2011E EPS | 11.5x | — | 23.2x | 14.0x–18.0x | $109.00–$130.00 |
Selected precedent transactions (7)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| — | Plus Orthopedics Holding AG | Smith & Nephew plc | — |
| — | Biomet, Inc. | Private Equity Consortium | — |
| — | Encore Medical Corporation | Blackstone Capital Partners V. L.P. | — |
| — | Mathys Medizinaltechnik AG | Synthes, Inc. | — |
| — | Centerpulse AG | Zimmer Holdings, Inc. | — |
| — | Stratec Holding Ltd. | Synthes, Inc. | — |
| — | Howmedica (Orthopaedic Division of Pfizer Inc.) | Stryker Corporation | — |
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | CAGR |
|---|---|---|---|---|
| Revenue | $4.6B | $4.9B | $5.2B | 7.0% |
| Revenue growth | 7.0% | 7.0% | 7.0% | |
| EBITDA | $1.8B | $2.0B | $2.1B | 7.0% |
| EBITDA growth | 0.0% | 7.0% | 7.0% | |
| EBITDA margin | 40% | 40% | 40% | |
| Implied EV / EBITDA | 9.6x | 8.9x | 8.3x |
Year-1 growth is against LTM at announcement ($4.3B revenue, $1.8B EBITDA); later years are year over year.
Synthes management prepared financial projections for calendar years 2011 through 2015 for the board and for Credit Suisse (not shared with Johnson & Johnson or other interested parties). Revenue grows from $3,993 million in 2011 to $5,238 million in 2015; EBITDA from $1,710 million to $2,246 million; EBIT from $1,357 million to $1,783 million; net income from $981 million to $1,301 million; EPS from $8.27 to $10.96; and unlevered free cash flow from $759 million to $1,396 million.
Process notes
Other Medical Devices and Supplies fairness opinions
- SonoSite / FUJIFILM Holdings 2011 · 21.1x 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 → · Credit Suisse opinions