Hologic Announces $135M Acquisition, Jefferies' Outlook Remains Favorable

Jefferies & Company has published a research report on Hologic HOLX after the company announced its plans to acquire an international distributor. In the report, Jefferies writes "Yesterday after the market close, Hologic announced the acquisition of an international distributor for $135M plus two annual contingent earn-out payments that can add an additional $165M, bringing the maximum deal value to $300M. The company did not provide specific details regarding covered territories or trailing financial metrics. However, we suspect the acquisition will give the company more coverage across either the APAC and EMEA regions or Latin America, all territories where it currently has a limited mix relative to its peers. Financials not disclosed being considered, we took a shot in the dark at estimating valuation by considering the purchase price plus earn-outs, Hologic's historical transactions, and the average margin profile for healthcare distributors. Based on this approach, we estimate a pre earn-out valuation of 2.0x TTM revenue and post earn-out valuation of 4.0x TTM suggesting an annual revenue run rate of $70M-$75M (discounts the historical 5.0x multiple to consider thinner distributor margins)." Jefferies maintains its Buy rating and $24 price target. Hologic closed yesterday at $19.78.