EUR56 non-binding offer by Cinven, target price raised to EUR62 - Buy
Stada received two non-binding expressions of interest in a takeover bid. One came from Cinven Partners, at an indicative takeover price of EUR56. We believe the chances for a bid have materially increased and a bidding competition is possible. We raise our fair value estimate from EUR55 to EUR62, which is based on valuing Stada at 12x 2017E adj. EBITDA. We reiterate our Buy rating.
Potential bidding war, TP raised to EUR62, Buy reiterated
We raised our target price to EUR55 in August 2016, when we included a one-third chance of a takeover bid in our fair value estimate. With last night’s announcement, the chances for a takeover have materially increased, although a successful transaction is obviously not guaranteed. We now value Stada at 12x 2017E adj. EBITDA, which derives our EUR62 new fair value estimate (up from EUR55). This implies an 11% premium to the indicated offer from Cinven. Note Stada stated that another party has also shown interest in a takeover and in our view it cannot be excluded that further parties, including potential strategic buyers, will also appear at the table. A bidding war is possible. The second interested party has not been disclosed. The Financial Times stated that Advent, Bain Capital, CVC and Permira “are following the situation closely”. One of these names could be the second interest party. As potential strategic/industry bidders Sun Pharma, Mylan, Teva and Novartis have been named in the press among others in the past. A list of industry transactions and selected industry take over multiples can be found in our Stada Espresso published on 16 August.
This includes Mylan/Meda at 12.9x EV/EBITDA, Teva/Allergan Generics at 15.0x EV/EBITDA, Meda/Rottapharm at 14.8x EV/EBITDA, Mylan/Abbotts’ non-US business at 8.8x EV/EBITDA among others. Of course all deals are specific and not directly comparable to Stada. However it shows that our 12x EV/EBITDA assumption appears not aggressive. It is close to the 11.8x EV/EBITDA that Teva paid for Ratiopharm back in 2010. This is probably the best comparable asset, while one can argue that transaction multiples since 2010 have rather been on the rise. Net, we believe the risk for the stock remains on the upside, also beyond the EUR56 indicated offer. We reiterate our Buy rating.