Raymond James analyst Rahul Sarugaser said he does not view Opsens Inc.’s (
)
agreement to be acquired by
Haemonetics Corp. (
HAE-N) for $2.90 per share in cash as “a great outcome” for shareholders, despite the deal represeting a 68-per-cent premium to its 10-day volume-weighted average price.
Moving his recommendation for Quebec City heart technology maker’s shares to “market perform” from “outperform” in response to Tuesday’s announcement of the $345-million transaction, he predicts “a non-zero probability of an over-the-top bid from a better-suited party willing to pay a fairer price for OPS’s cath lab products — OptoWire & SavvyWire — plus its underlying optical technology and IP.”
Mr. Sarugaser said he has been consistent in his view Opsens would “engender greater value in the hands of a larger player,” yet he pointed to three reasons why he thinks the deal is not great for OPS’s shareholders:
* Concerns over the size of Haemonetics.
“Notwithstanding [Vascade’s] impressive revenue trajectory, having a single product type in the cath lab channel gives us pause as to HAE’s ability to supercharge sales of OptoWire & SavvyWire,” he said. “Given other big Med-Tech players’ broad/deep portfolios currently sold into cath labs, we would see these other larger players as potential acquirers with greater ability to extract value from OptoWire & SavvyWire.”
* A fair price would be closer to $3.50-$4 per share.
“To us, the $2.90 per share deal price — representing a price tag of 5.4 times FY24 consensus revenue — feels quite low,” he said. “OPS is still in the very early innings of its SavvyWire product launch, which we expect to inflect revenue. into 2025 (not to mention the potential for greater synergistic OptoWire penetration, plus, OPS’s growing OEM revenue from sales to JNJ.”
* Gross margin disparities
“We have seen OPS drive GM’s into the 60-per-cent range, while HAE’s GM currently sits at 55 per cent, with its commensurate 4.0 times FY24 revenue multiple,” he said. “Given OPS’s premium GM profile, we would reasonably expect a premium revenue multiple, driving, in our view, a fair price closer to $3.50-$4.00.”
To reflect the deal, Mr. Sarugaser cut his target for Opsens shares to $2.90 from $3.50. The current average is $2.48.