Theragenics acquired by Juniper Investment: fairness opinion by Brown Gibbons Lang Securities
Announced August 2, 2013 · Going-private · All cash ·
DEFM14A filed September 17, 2013
Enterprise value
$68.0M
equity $69.5M
EV / LTM EBITDA
9.6x
EBITDA $7.1M · 9% margin
EV / LTM revenue
0.87x
revenue $78.1M
DCF discount rate
20.0%–24.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$2.20
Premium47.7%
Premium basisclosing price of $1.49 on May 10, 2013, the last full trading day prior to announcement of the letter of intent with Juniper
StructureGoing-private
Termination fee$3.5M
Reverse termination fee$4.0M
Go-shop35 days · $2.0M reduced fee
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $2.20 offer
Selected companies — EV / LTM Adjusted EBITDA - selected diversified surgical products companies $2.08 – $2.94
Selected companies — EV / CY2013E Adjusted EBITDA - selected diversified surgical products companies $1.24 – $1.66
Precedent transactions — EV / LTM Adjusted EBITDA $1.90 – $4.36
Discounted cash flow $2.04 – $2.49
Leveraged Buyout Analysis $1.97 – $2.65
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Brown Gibbons Lang Securities to the target board
Delivered August 1, 2013 · Fee $0.2M ($0.0M contingent on closing), $0.2M on delivery of the opinion
Discounted cash flow assumptions
Discount rate20.0%–24.0%
BasisCompany's weighted average cost of capital applying the capital asset pricing model
Terminal valueExit multiple
Perpetuity growth—
Exit multiple7.0x–8.0x FY2017E Adjusted EBITDA (terminal value at January 1, 2018)
Projection periodQ4 2013 (Oct 1, 2013) - 2017E
Projections usedManagement financial forecasts as adjusted by BGL to moderate surgical products division revenue growth and operating margins (the "sensitized case"), adjusted to remove public company related expenses
Implied value per share$2.04–$2.49
Unlevered after-tax free cash flow defined as operating income (adjusted for public company expenses) less taxes, capex, changes in net working capital and restructuring cash outflows, plus D&A and other non-cash charges; ~31.6 million fully diluted shares.
Selected public companies (15)
Eckert & Ziegler Strahlen & Medizintechnik AG · AngioDynamics, Inc. · ArthroCare Corporation · ATRION Corp. · Cardiovascular Systems, Inc. · CR Bard Inc. · CONMED Corp. · Greatbatch Inc. · Edwards Lifesciences Corp. · LeMaitre Vascular Inc. · Merit Medical Systems, Inc. · RTI Biologics, Inc. · SurModics, Inc. · Teleflex Incorporated · Vascular Solutions Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Adjusted EBITDA - selected brachytherapy focused company (Eckert & Ziegler) | 5.3x | 5.3x | 5.3x | — | — |
| EV / CY2013E Adjusted EBITDA - selected brachytherapy focused company (Eckert & Ziegler) | 4.9x | 4.9x | 4.9x | — | — |
| EV / LTM Adjusted EBITDA - selected diversified surgical products companies | 7.1x | 10.4x | 13.8x | — | $2.08–$2.94 |
| EV / CY2013E Adjusted EBITDA - selected diversified surgical products companies | 7.7x | 10.9x | 15.1x | — | $1.24–$1.66 |
Selected precedent transactions (25)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2013-05 | Targeted Therapies division of Nordion Inc. (d/b/a Therasphere) | BTG plc | — |
| 2013-03 | Angiotech Pharmaceuticals, Interventional Cardiology Division | Argon Medical Devices | — |
| 2012-12 | King Systems Corporation | Ambu A/S | — |
| 2012-11 | Thomas Medical Products, Inc. | Merit Medical Systems, Inc. | — |
| 2012-07 | Aspen Surgical Products, Inc. | Hill-Rom, Inc. | — |
| 2012-05 | Kensey Nash Corporation | Koninklijke DSM N.V. | — |
| 2012-01 | Navilyst Medical Inc. | AngioDynamics Inc. | — |
| 2011-11 | IZI Medical Products, Inc. | Landauer Inc. | — |
| 2011-10 | Synovis Life Technologies Inc. | Baxter International Inc. | — |
| 2010-10 | Cardiac Science Corporation | Opto Circuits (India) Ltd. | — |
| 2010-08 | AVID Medical, Inc. | Medical Action Industries Inc. | — |
| 2010-07 | Micrus Endovascular Corp. | Codman & Shurtleff, Inc. | — |
| 2010-05 | SenoRx, Inc. | Bard Peripheral Vascular, Inc. | — |
| 2010-03 | Medegen, LLC | CareFusion Corporation | — |
| 2008-09 | Datascope Corp. | Getinge AB | — |
| 2008-07 | NeedleTech Products, Inc. | Theragenics Corp. | — |
| 2008-05 | Kensey Nash Corp., Endovascular Business | The Spectranetics Corporation | — |
| 2008-03 | Specialized Health Products International, Inc. | CR Bard Inc. | — |
| 2007-11 | Boston Scientific Corporation, Cardiac Surgery and Vascular Surgery Businesses | Getinge AB | — |
| 2007-08 | Avail Medical Products, Inc. | Flextronics International Ltd. | — |
| 2007-07 | Foxhollow Technologies, Inc. | ev3 Inc. | — |
| 2006-11 | RITA Medical Systems Inc. | AngioDynamics Inc. | — |
| 2006-08 | Galt Medical Corp. | Theragenics Corp. | — |
| 2006-04 | Miltex, Inc. | Integra LifeSciences Holdings Corporation | — |
| 2006-03 | Astro Instrumentation, Inc. | Sparton Corp. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Adjusted EBITDA | 7.5x | 12.0x | 17.8x | — | $1.90–$4.36 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Summary of Proposal | $2.20 per share on ~31.6 million fully diluted shares implied equity value of ~$69.5 million; after net cash adjustment of ~$4.7 million (including CIC payment obligations), implied enterprise value of ~$64.8 million. | — |
| Premiums Paid Analysis | $2.20 represented premiums of 47.7% over the $1.49 closing price on May 10, 2013 (last trading day before announcement of LOI with Juniper), 45.8% over 1-week VWAP of $1.51, 47.1% over 30-day VWAP of $1.50, 42.8% over 90-day VWAP of $1.54 and 43.6% over 6-month VWAP of $1.53. BGL reviewed 88 acquisitions of publicly traded domestic companies closed since August 1, 2012 with enterprise values of $25-$500 million; one-day premium percentiles ranged from 14.5% (10th) to 81.4% (90th) with a median of 40.9%; implied one-day premium of 47.7%, one-week 43.8% and 30-day 44.7%. | — |
| Leveraged Buyout Analysis | Theoretical purchase price payable by a hypothetical financial sponsor using the sensitized case (adjusted to remove public company expenses), exit in 2017 at 6.0x-9.0x FY2017E adjusted EBITDA and required IRRs of 25.0%-35.0%. | $1.97–$2.65 |
Company paid BGL $200,000 in total for delivery of its fairness opinion, plus expense reimbursement; fee not contingent upon views expressed or upon closing of the merger.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $78.5M | $81.8M | $86.0M | $90.3M | 4.8% |
| Revenue growth | 0.5% | 4.2% | 5.1% | 5.0% | |
| EBITDA | $10.0M | $12.3M | $13.6M | $15.0M | 14.5% |
| EBITDA growth | 40.8% | 23.0% | 10.6% | 10.3% | |
| EBITDA margin | 13% | 15% | 16% | 17% | |
| Implied EV / EBITDA | 6.8x | 5.5x | 5.0x | 4.5x |
Year-1 growth is against LTM at announcement ($78.1M revenue, $7.1M EBITDA); later years are year over year.
Management forecasts for 2013E-2017E were provided to the board, VRA, BGL, Juniper and other interested parties: total revenue of $78.1 million in 2013E growing to $90.3 million in 2017E; adjusted EBITDA of $7.1 million in 2013E rising to $15.0 million in 2017E; adjusted operating income of $(1.3) million in 2013E to $8.6 million in 2017E; capex declining from $3.1 million to $1.2 million. For its fairness opinion BGL adjusted these forecasts to reflect execution risks, moderating revenue growth and operating margins for the surgical products division (the "sensitized case"), which it used in its DCF and LBO analyses.
Process notes
Going-private transaction by financial sponsor Juniper; Juniper Public Fund, L.P. agreed to contribute ~2 million Theragenics shares to Purchaser. Two financial advisors involved: Valence Group/VRA (referred to as \"VRA\") acted as the Company's third-party financial advisor and ran the process/negotiations and the go-shop (contacting 42 parties), but only Brown, Gibbons, Lang & Company Securities, Inc. (BGL) delivered a fairness opinion, for a flat $200,000 fee not contingent on closing. Price was negotiated down from $2.25 to $2.20 after a revised long-term forecast. Certain members of management agreed to equity participation with Juniper. Purchaser reverse termination fee of $2.0m or $4.0m depending on financing circumstances, guaranteed by Juniper TGX Investment Partners, LLC. Company expense reimbursement up to $1.5m.
Other Medical Devices and Supplies fairness opinions
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- Rochester Medical / C. R. Bard 2013 · 13.1x 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 → · Brown Gibbons Lang Securities opinions