Deutsche Bank Maintains a 'Hold' on Laboratory Corporation of America (LH); Leveraged Buy-out Model

August 1, 2012 7:44 AM EDT
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Price: $134.39 +0.30%

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Deutsche Bank maintains a 'Hold' on Laboratory Corporation of America (NYSE: LH) price target of $94.00.

Deutsche analyst said, "Although we are not in a position to verify the Mergermarket story, we are in a position to respond to these press reports from an analytical framework...We figure LH shareholders would require a premium of at least 15%-25% suggesting a take-out range of $95-$105 for an EV/EBITDA of 9x-10x (vs. current 7.6x 2012E). Based on our LBO model analysis, we observe the following: (1) The IRR profile of a potential LBO would be acceptable for large PE firms (in the mid/upper-teens to low-20% range). (2) Assumed leverage is in a range of 6x-7x (total debt of $8 billion to $9 billion), and the potential equity check would be ~$4 billion or ~3x 2012E adjusted EBITDA of $1.342 billion. (3) Our LBO model assumes 5-yr revenue CAGR of 2.5%-3% (including modest M&A contribution)..."

Deutsche also thinks long-term buyers are attracted to the name as demand for lab testing increases.

For an analyst ratings summary and ratings history on Laboratory Corporation of America click here. For more ratings news on Laboratory Corporation of America click here.

Shares of Laboratory Corporation of America closed at $84.09 yesterday.

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