Hologic expects 3x leverage ratio after Cynosure deal; may retire convertibles

By Devika Patel

Knoxville, Tenn., Feb. 14 – Hologic, Inc. plans to use cash on hand for its acquisition of Cynosure, Inc. for $66.00 per share.

After the transaction, which has an equity value of $1.65 billion and an enterprise value of $1.44 billion net of cash, the company expects to have a healthy 3x leverage ratio.

The company recently sold its blood screening business for $1.85 billion, giving it plenty of cash to fund the transaction as well as enough cash after the deal closes to retire its convertible notes.

“[This acquisition] provides compelling financial benefits,” chairman, president and chief executive officer Stephen P. MacMillan said on a conference call announcing the acquisition on Tuesday.

“We intend to fully fund the Cynosure acquisition with cash on hand, including proceeds from the recently completed blood screening divestiture.

“From a balance sheet perspective, we expect our leverage ratio, net debt to EBITDA, to be roughly 3x, following the transaction,” he said.

“We are comfortable with this level of leverage and believe that with our strong cash flows we still have the ability to pursue smaller acquisitions, retire our convertible notes and buy back stock in the future.”

MacMillan noted that the transaction was only possible because Hologic recently sold its blood screening business for $1.85 billion, increasing its ability to fund such a big acquisition.

“Two things happened [to enable the acquisition], both of which were a little serendipitous.

“First, we sold our blood screening business to Grifols for $1.85 billion, which significantly increased our financial flexibility and our ability to consider a deal of this size.

“Second, Cynosure received an unsolicited inbound offer from another company, which caused them to reach out to us,” MacMillan said.

Hologic is a Bedford, Mass.-based developer, manufacturer and supplier of diagnostic products, medical imaging systems and surgical products. Cynosure is a medical aesthetics systems and technologies company.

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