Thoratec acquired by St. Jude Medical: fairness opinion by Centerview Partners
Announced July 22, 2015 · One-step merger · All cash ·
DEFM14A filed September 8, 2015
Medical Devices and Supplies Medical Devices
Enterprise value
$3.3B
EV / LTM EBITDA
26.5x
EBITDA $124M · 24% margin
EV / LTM revenue
6.39x
revenue $514M
DCF discount rate
9.5%–11.0%
Perpetuity growth
Deal terms
ConsiderationAll cash
Price per share$63.50
Premium35.4%
Premium basisClosing price of $46.89 on July 17, 2015, the last trading date during which trading appeared not influenced by information related to a possible transaction
StructureOne-step merger
Termination fee$111M
Reverse termination fee—
Go-shop30 days · $29.5M reduced fee
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $63.50 offer
Selected companies — EV / CY2015E Revenue $44.65 – $51.95
Selected companies — EV / CY2016E Revenue $46.05 – $54.45
Selected companies — EV / CY2015E EBITDA $27.60 – $33.20
Selected companies — EV / CY2016E EBITDA $33.00 – $38.00
Precedent transactions — EV / LTM Revenue $37.95 – $69.50
Precedent transactions — EV / NTM Revenue $41.55 – $70.15
Precedent transactions — EV / LTM EBITDA $30.20 – $54.05
Precedent transactions — EV / NTM EBITDA $30.40 – $41.30
Discounted cash flow $53.95 – $76.85
52-week trading range $22.74 – $48.81
Wall Street analyst price targets $41.00 – $53.50
Premiums paid analysis $60.45 – $77.15
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Centerview Partners to the target board
Delivered July 21, 2015 · Fee $1.5M, $1.5M on delivery of the opinion
Discounted cash flow assumptions
Discount rate9.5%–11.0%
BasisCenterview's analysis of the Company's weighted average cost of capital
Terminal valuePerpetuity growth
Perpetuity growth1.0%–3.0%
Exit multiple—
Projection periodJuly 1, 2015 through December 31, 2025
Projections usedCompany management forecasts (Strategic Plan Base Case Revenue Forecasts and Updated Strategic Plan)
Implied value per share$53.95–$76.85
Discounted to present value as of June 30, 2015 using mid-year convention; added estimated net cash of $240 million as of July 17, 2015.
Selected public companies (10)
ABIOMED, Inc. · Globus Medical, Inc. · HeartWare International, Inc. · Integra LifeSciences Holdings Corporation · Masimo Corporation · Natus Medical Incorporated · NuVasive, Inc. · ResMed Inc. · The Cooper Companies, Inc. · The Spectranetics Corporation
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2015E Revenue | 3.6x | 4.5x | 5.4x | 4.5x–5.4x | $44.65–$51.95 |
| EV / CY2016E Revenue | 3.3x | 4.1x | 5.0x | 4.1x–5.0x | $46.05–$54.45 |
| EV / CY2015E EBITDA | 14.1x | 15.3x | 19.0x | 15.3x–19.0x | $27.60–$33.20 |
| EV / CY2016E EBITDA | 12.7x | 14.2x | 16.8x | 14.2x–16.8x | $33.00–$38.00 |
Selected precedent transactions (16)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2014-12-17 | Volcano Corporation | Royal Philips | — |
| 2014-09-15 | Nobel Biocare Holding AG | Danaher Corporation | — |
| 2014-02-03 | ArthroCare Corporation | Smith & Nephew, Inc. | — |
| 2013-09-25 | MAKO Surgical Corp. | Stryker Corporation | — |
| 2013-04-29 | Conceptus, Inc. | Bayer HealthCare LLC | — |
| 2013-12-08 | Given Imaging Ltd. | Covidien Group S.a.r.l. | — |
| 2012-12-04 | Gambro AB | Baxter International Inc. | — |
| 2012-11-28 | Healthpoint Biotherapeutics | Smith & Nephew plc | — |
| 2012-03-12 | ZOLL Medical Corporation | Asahi Kasei Corporation | — |
| 2011-12-15 | SonoSite, Inc. | FUJIFILM Holdings Corporation | — |
| 2011-10-03 | Atrium Medical Corporation | Getinge Group | — |
| 2011-07-13 | Kinetic Concepts, Inc. | Apax Partners, et al. | — |
| 2011-04-11 | American Medical Systems Holdings, Inc. | Endo Pharmaceuticals Holdings Inc. | — |
| 2010-10-28 | Boston Scientific Corporation Neurovascular Division | Stryker Corporation | — |
| 2010-10-18 | AGA Medical Holdings, Inc. | St. Jude Medical, Inc. | — |
| 2010-06-01 | ev3 Inc. | Covidien Group S.a.r.l. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 3.1x | 4.0x | 7.9x | 4.0x–7.9x | $37.95–$69.50 |
| EV / NTM Revenue | 2.9x | 3.9x | 6.9x | 3.9x–6.9x | $41.55–$70.15 |
| EV / LTM EBITDA | 13.9x | 17.5x | 34.1x | 17.5x–34.1x | $30.20–$54.05 |
| EV / NTM EBITDA | 13.3x | 14.9x | 21.3x | 14.9x–21.3x | $30.40–$41.30 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-week trading range | Historical closing trading prices of Company Common Stock during 52-week period ended July 20, 2015. | $22.74–$48.81 |
| Wall Street analyst price targets | Stock price targets in publicly available Wall Street research analyst reports. | $41.00–$53.50 |
| Premiums paid analysis | Premiums paid in the selected medical technology precedent transactions: high 58%, 75th percentile 31%, median 24%, 25th percentile 19%. Median and high premiums applied to the Company's July 20, 2015 closing price of $48.81. | $60.45–$77.15 |
The Company paid Centerview an aggregate fee of $1,500,000 upon the rendering of its opinion, plus expense reimbursement and indemnification.
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 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $586M | $665M | $756M | $958M | $1.2B | 18.5% |
| Revenue growth | 14.1% | 13.5% | 13.6% | 26.8% | 20.7% | |
| EBITDA | $154M | $187M | $226M | $348M | $470M | 32.2% |
| EBITDA growth | 24.0% | 21.5% | 20.8% | 54.3% | 35.0% | |
| EBITDA margin | 26% | 28% | 30% | 36% | 41% | |
| Implied EV / EBITDA | 21.4x | 17.6x | 14.6x | 9.4x | 7.0x |
Year-1 growth is against LTM at announcement ($514M revenue, $124M EBITDA); later years are year over year.
Management prepared a Strategic Plan (approved June 2015) and an Updated Strategic Plan (approved July 2015), plus base, upside and downside revenue cases; only the Base Case was provided to St. Jude Medical and used by both bankers. The Updated Strategic Plan projected total revenue of $513.9 million in 2015 growing to $1,156.3 million in 2020, with Adjusted EBITDA of $123.8 million in 2015 rising to $469.9 million in 2020 and non-GAAP EPS of $1.45 to $6.00. Management also provided unlevered free cash flow growth rate estimates for 2021-2025 (15%, 10%, 10%, 10%, 5%).
Process notes
Two financial advisors — Guggenheim Securities and Centerview Partners — both delivered fairness opinions to the Company Board; only the Centerview opinion section was provided in these slices, so Guggenheim's analyses and fees are not captured here. The deal included a 30-day go-shop period ending August 21, 2015 with a reduced termination fee of $29.5 million (approximately 0.8% of aggregate merger consideration) for Excluded Parties through September 9, 2015; the Company reported no Excluded Parties, so only the $110.5 million fee applies. St. Jude Medical's price rose from $59.65 to $63.00 to $63.50 per share during negotiations. Directors and executive officers entered a voting agreement.
Other Medical Devices and Supplies fairness opinions
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- Liberator Medical Holdings / C. R. Bard 2015 · 11.5x EV/EBITDA
- Sorin / Cyberonics / LivaNova 2015 · 12.3x EV/EBITDA
- Synergetics USA / Bausch Health Companies 2015 · 13.2x EV/EBITDA
- Vascular Solutions / Teleflex 2016 · 25.7x EV/EBITDA
- EndoChoice Holdings / Boston Scientific 2016
All Medical Devices and Supplies opinions → · Centerview Partners opinions