Concordia Healthcare Corp. T.CXR.R

TD - The Strategic Review

[kurosagii1]

• The Strategic Review – Management declined to update its April 21 disclosure regarding strategic review. We nonetheless continue to think that a transaction is conceivable in the 9x-10x EV/ EBITDA (trailing) range; resulting in a takeout price range of $40 - $55 (a greater than 74% premium to last night's close). Exhibit 4 illustrates a broader range of takeout scenarios. 
   

  Exhibit 3. Select Precedent Transactions

  
  
  Date/ Acquirer /Target /Target Profile/ Price (US$mm)/ Trailing Sales (US$mm)/ Trailling (US$mm)/ Valuation EV/EBITDA

  Feb-16 Mylan Meda Diversified $9,900 $2,339 $767 12.9x

  Sep-15 Concordia AMCo Diversified $3,300 $545 $283 11.6x

  Apr-15 Concordia Covis Diversified/ Legacy $1,200 $220 $198 6.1x

  May-13 Actavis Warner Chilcott Women's Health, GI, Derm $8,500 $2,541 $1,437 5.9x

  Jul-12 TPG Capital Par Pharmaceuticals Generics $2,270 $1,035 $273 8.3x

  J u n - 1 0 B i o va i l V a l e a n t D i ve r s i f i e d $ 3 , 2 0 0 $ 8 7 5 $ 3 9 7 8 . 1 x 

  Oct-10 Pfizer King Neuroscience, Acute Care $3,600 $1,780 $390 9.2x

  Nov-07 TPG Capital Axcan Pharmaceutical Gastroenterology $1,300 $369 $139 9.4x

  Average 8.9x

  Source: Company reports and TD Securities estimates 

 

Exhibit 4. Takeout Scenarios – Sensitivity Analysis

(US$) EV/EBITDA 7x 8x 9x 9.5x 10x 11x 12x
Q1/16 Annualized EBITDA $563mm	$16 $27 -32% 16%	$38 $43 63% 86%	$48 $59 $70 110% 157% 205%
Premium on yesterday close ($23.03)
2016E EBITDA Estimate $628mm	$24 $37 6% 59%	$49 $55 112% 138%	$61 $73 $85 164% 217% 270%
Premium on yesterday close ($23.03)

Source: Company reports and TD Securities estimates 

[bull_man]

takeout scenario: basically we are looking at anywhere between CDN$52.00 and CDN$72.00 according to TD; not sure if management will go for that; my feeling is that they think they can grow this to much higher levels as a stand-alone.

[Roller007]

Bull man:  don't think it's enough.  We are at a win win though since if they do go for it then we make money and if they don't go for it then it's confirmation of MT conviction in the ability of Cxr to make money and grow their balance sheet, we will make money holding 

[notwrong]

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[fdfd12]

I agree with the takout part. If we can get the stock price to $50 then takout will be 30% of that. The higher the better.