Varian Medical Systems acquired by Siemens Healthineers: fairness opinion by Goldman Sachs
Deal terms
Implied value per share by method vs. $177.50 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Discounted cash flow assumptions
Discounted to present value as of July 3, 2020; net debt and fully diluted shares (treasury stock method) per Varian management.
Selected precedent transactions (3)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-09-15 | Sirona Dental Systems Inc. | Dentsply International Inc. | 16.1x EV / LTM EBITDA |
| 2016-04-28 | St. Jude Medical, Inc. | Abbott Laboratories | 19.8x EV / LTM EBITDA |
| 2017-04-23 | C.R. Bard, Inc. | Becton, Dickinson and Company | 21.2x EV / LTM EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | 16.1x | 19.8x | 21.2x | 16.1x–21.2x | $100.00–$131.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading Analysis | Reviewed five-year trading history through July 31, 2020 and compared $177.50 to: closing price $142.72 (24.4% premium); 52-week high close $149.57 (18.7%); 52-week low close $89.81 (97.6%); 30-day VWAP $125.06 (41.9%); 60-day VWAP $122.77 (44.6%); median analyst price target $133.00 (33.5%). | $89.81–$149.57 |
| Illustrative Present Value of Future Share Price Analysis | Applied P/forward EPS multiples of 23.5x to 28.5x to adjusted EPS estimates for fiscal 2022-2024 to derive implied future share prices for fiscal 2021-2023, discounted to July 3, 2020 at a 7.56% cost of equity (CAPM). | $118.00–$176.00 |
| Premia Analysis | Reviewed premia for transactions announced since August 2015 involving U.S. public targets with enterprise value greater than $10 billion; median premium 27%, 25th percentile 17%, 75th percentile 42%. Applied 17%-42% to the undisturbed closing price of $142.72. | $167.00–$203.00 |
Engagement letter dated August 1, 2020; transaction fee estimated at approximately $77 million, all contingent upon consummation of the merger. Goldman Sachs recognized ~$1.6 million of compensation from Siemens AG and/or affiliates during the two-year period ended August 2, 2020.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $3.5B | $3.9B | $4.2B | $4.5B | $4.9B | 9.2% |
| Revenue growth | 9.1% | 12.0% | 7.2% | 9.0% | 8.7% | |
| EBITDA | — | — | — | — | — | — |
| EBITDA growth | — | — | — | — | — | |
| EBITDA margin | — | — | — | — | — | |
| Implied EV / EBITDA | — | — | — | — | — |
Year-1 growth is against LTM at announcement ($3.2B revenue, $557M EBITDA); later years are year over year.
Varian management prepared non-public standalone projections for fiscal years 2020 through 2030 (the "Varian Projections"), provided to the Varian Board and Goldman Sachs. Revenue grows from $3,167 million in 2020E to $7,081 million in 2030E; Adjusted Operating Earnings (non-GAAP) from $450 million to $2,020 million and Adjusted EPS from $3.72 to $17.32. Goldman Sachs calculated Adjusted EBIT ($414 million in 2020E to $1,973 million in 2030E), unlevered free cash flow ($64 million in Q4 2020E to $1,405 million in 2030E) and LTM EBITDA as of July 3, 2020 of $557 million from these projections.
Process notes
Other Medical Devices and Supplies fairness opinions
- Hill-Rom Holdings / Baxter International 2021 · 17.6x EV/EBITDA
- Wright Medical Group / StrykerCorp. 2019 · 14.6x EV/EBITDA
- Misonix / Bioventus 2021
- Cantel Medical / STERIS 2021 · 16.2x EV/EBITDA
- CAS Medical Systems / Edwards Lifesciences 2019
- Osiris Therapeutics / Smith & Nephew 2019 · 28.8x EV/EBITDA
All Medical Devices and Supplies opinions → · Goldman Sachs opinions