ZELTIQ Aesthetics acquired by Allergan: fairness opinion by Guggenheim Securities
Deal terms
Implied value per share by method vs. $56.50 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Guggenheim Securities to the target board
Discounted cash flow assumptions
Based on projected after-tax unlevered free cash flows including stock-based compensation treated as a cash expense. Range excludes approximately $0.58 per share attributable to the estimated present value of ZELTIQ's NOL carryforwards as of December 31, 2016.
Selected public companies (13)
AtriCure, Inc. · Cadiovascular Systems Inc. (Cardiovascular Systems Inc.) · Entellus Medical, Inc. · Glaukos Corporation · Intersect ENT, Inc. · iRhythm Technologies, Inc. · K2M Group Holdings Inc. · MiMedX Group Inc. · Nevro Corp. · Novadaq Technologies Inc. · Penumbra, Inc. · Spectranetics Corp. · Wright Medical Group N.V.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2017E Revenue | 2.9x | 4.0x | 11.1x | 4.0x–5.5x | $44.50–$60.40 |
Selected precedent transactions (25)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2016-12-02 | Vascular Solutions Inc. | Teleflex Inc. | 5.4x Transaction Value / NTM Revenue |
| 2016-12-02 | Vascular Solutions Inc. | Teleflex Inc. | 21.4x Transaction Value / NTM EBITDA |
| 2016-06-27 | HeartWare International, Inc. | Medtronic plc | 4.5x Transaction Value / NTM Revenue |
| 2016-06-07 | LDR Holding Corp. | Zimmer Biomet Holdings, Inc. | 5.4x Transaction Value / NTM Revenue |
| 2016-02-01 | Sage Products, LLC | Stryker Corporation | — |
| 2015-07-22 | Thoratec Corporation | St. Jude Medical, Inc. | 6.8x Transaction Value / NTM Revenue |
| 2015-07-22 | Thoratec Corporation | St. Jude Medical, Inc. | 27.0x Transaction Value / NTM EBITDA |
| 2013-12-08 | Given Imaging Ltd. | Covidien plc | 4.1x Transaction Value / NTM Revenue |
| 2013-12-08 | Given Imaging Ltd. | Covidien plc | 20.4x Transaction Value / NTM EBITDA |
| 2013-09-25 | MAKO Surgical Corporation | Stryker Corporation | 11.4x Transaction Value / NTM Revenue |
| 2013-04-29 | Conceptus Inc. | Bayer Healthcare LLC | 6.7x Transaction Value / NTM Revenue |
| 2013-04-29 | Conceptus Inc. | Bayer Healthcare LLC | 29.1x Transaction Value / NTM EBITDA |
| 2012-11-28 | Healthpoint Biotherapeutics | Smith & Nephew plc | 3.7x Transaction Value / NTM Revenue |
| 2012-11-28 | Healthpoint Biotherapeutics | Smith & Nephew plc | 16.2x Transaction Value / NTM EBITDA |
| 2012-03-12 | ZOLL Medical Corporation | Asahi Kasei Corporation | 3.0x Transaction Value / NTM Revenue |
| 2011-12-15 | SonoSite, Inc. | Fujifilm Holdings Corporation | 2.8x Transaction Value / NTM Revenue |
| 2011-12-15 | SonoSite, Inc. | Fujifilm Holdings Corporation | 17.1x Transaction Value / NTM EBITDA |
| 2011-07-07 | Salient Surgical Technologies, Inc. | Medtronic, Inc. | — |
| 2010-10-18 | AGA Medical Holdings, Inc. | St. Jude Medical, Inc. | 5.3x Transaction Value / NTM Revenue |
| 2010-10-18 | AGA Medical Holdings, Inc. | St. Jude Medical, Inc. | 19.8x Transaction Value / NTM EBITDA |
| 2010-07-12 | Micrus Endovascular Corp. | Johnson & Johnson | 4.1x Transaction Value / NTM Revenue |
| 2010-07-12 | Micrus Endovascular Corp. | Johnson & Johnson | 18.2x Transaction Value / NTM EBITDA |
| 2010-07-01 | ev3 Inc. | Covidien plc | 4.7x Transaction Value / NTM Revenue |
| 2010-07-01 | ev3 Inc. | Covidien plc | 21.1x Transaction Value / NTM EBITDA |
| 2010-04-29 | ATS Medical Inc. | Medtronic, Inc. | 4.4x Transaction Value / NTM Revenue |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Transaction EV / NTM Revenue | 2.8x | 4.6x | 11.4x | 4.6x–6.0x | $50.80–$65.70 |
| Transaction EV / NTM EBITDA | 16.2x | 20.4x | 29.1x | 20.0x–30.0x | $23.90–$35.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| ZELTIQ LTM Stock Price Range (informational) | Historical trading price range for ZELTIQ common stock over the last twelve months, reviewed for informational reference purposes. | $19.30–$49.40 |
| Wall Street Equity Research Analyst Price Targets (informational) | Analyst price targets published prior to February 10, 2017 of $35.00-$55.00 per share, or approximately $31.50-$49.50 per share on a present value basis using an illustrative 11.1% discount rate (midpoint of estimated cost of equity). | $31.50–$49.50 |
| Recap of Implied Merger Financial Metrics / Premia | At $56.50 per share: 14.4% premium to $49.40 close on 02/10/17; 24.9% to unaffected $45.25 close on 02/07/17; 32.1% to unaffected 20-day VWAP of $42.76; 23.5% to unaffected 52-week high of $45.76. Implied EV/2017CY revenue of 5.1x on management estimates ($471M) and 5.8x on Wall Street consensus ($419M); EV/2017CY EBITDA of 49.5x ($49M) and EV/2017CY adjusted EBITDA of 33.6x ($72M). | — |
| ZELTIQ Stock Price Trading History (informational) | Reviewed ZELTIQ's stock price trading history over various timeframes, noting ZELTIQ significantly outperformed its peer index over the twelve months prior to execution of the merger agreement. | — |
Cash transaction fee (percentage of aggregate consideration) estimated at approximately $21.8 million payable upon consummation; a $1.0 million cash milestone fee became payable upon delivery of the opinion and will be credited against the transaction fee. Guggenheim previously received $10.0 million as financial advisor to an Allergan affiliate on its LifeCell acquisition, and fees from AqueSys, Inc. in its 2015 acquisition by an Allergan affiliate.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $587M | $718M | $847M | $975M | $1.1B | 16.9% |
| Revenue growth | 24.6% | 22.3% | 18.0% | 15.1% | 12.4% | |
| EBITDA | $105M | $142M | $186M | $232M | $279M | 27.7% |
| EBITDA growth | 45.8% | 35.2% | 31.0% | 24.7% | 20.3% | |
| EBITDA margin | 18% | 20% | 22% | 24% | 25% | |
| Implied EV / EBITDA | 22.6x | 16.7x | 12.7x | 10.2x | 8.5x |
Year-1 growth is against LTM at announcement ($471M revenue, $72.0M EBITDA); later years are year over year.
Guggenheim Securities relied on the "ZELTIQ projections," non-public financial projections for the years ending December 31, 2017 through December 31, 2026 prepared and provided by ZELTIQ senior management (derived from a preliminary five-year strategic plan extrapolated by management into a ten-year plan). Management estimates for 2017CY were revenue of approximately $471 million, EBITDA of approximately $49 million and adjusted EBITDA (not burdened by stock-based compensation) of approximately $72 million; Wall Street consensus 2017CY revenue was approximately $419 million. Management projections also included an estimated present value of ZELTIQ's NOL carryforwards as of December 31, 2016 of approximately $0.58 per share.
Process notes
Other Medical Devices and Supplies fairness opinions
- NxStage Medical / Fresenius Medical Care AG & Co. KGaA 2017 · 29.7x EV/EBITDA
- Exactech / TPG 2017 · 15.0x EV/EBITDA
- Entellus Medical / StrykerCorp. 2017
- Spectranetics / Philips 2017
- Miramar Labs / Sientra 2017
- C. R. Bard / Becton Dickinson 2017 · 20.1x EV/EBITDA
All Medical Devices and Supplies opinions → · Guggenheim Securities opinions