UPDATE: Jefferies Says Rumored Life Tech (LIFE) LBO Should Price at $50 to $60/Share

January 18, 2013 8:33 AM EST
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(Updated - January 18, 2013 2:15 PM EST)

According to recent reports, Life Technologies Corporation (NASDAQ: LIFE) is pursuing a sale of the company. Reports also say a number of private equity firms are interested in a leveraged buyout (LBO). In response to reports, Life Technologies said today they retained Deutsche Bank and was conducting a strategic review, essentially confirming that the company is 'in play'.

Some talk has suggested that a buyout would target a price of $65 to $75. This range was put forward by JPMorgan analyst Tycho Peterson. He said given the company's cash flow and potential cost savings, 11-12x EBITDA is "not out of the question".

This price range, in the view of analysts at Jefferies, is overly ambitious.

"Based on our initial analysis, we estimate an LBO transaction valuing LIFE's equity in the $50 to $60 range is logical in present financial market conditions. Such an analysis contemplates a net leverage ratio of 5.5x to 6.0x our 2013 EBITDA forecast (implying $5.5B to $6.2B of incremental debt funding) and an equity investment of 30% to 35% of transaction value," said analyst Jon Wood.

Models used by Wood suggest a 15 percent IRR would price the LBO at $58 per share.

"Such a level implies an enterprise value of 9.3 times our 2013 EBITDA forecast, essentially in line with LIFE's five-year historical FTM average, which we view as rational given limited visibility around a recovery in gov't / academic research funding budgets," concluded the analyst.

BofA analyst Derik de Bruin thinks a Life Tech LBO priced at $60 per share is possible.

Jefferies has a Buy rating on Life Technologies (NASDAQ: LIFE) with a price target of $58.00

For an analyst ratings summary and ratings history on Life Technologies click here. For more ratings news on Life Technologies click here.

Shares of Life Technologies closed at $54.97 yesterday.

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