June 25, 2015 / 2:07 PM / in 3 years

Exclusive: Cinven buys lab chain Synlab for $1.9-2.0 billion

FRANKFURT (Reuters) - Buyout group Cinven [CINV.UL] has agreed to acquire German laboratory operator Synlab from BC Partners [BCPRT.UL] for 1.7-1.8 billion euros ($1.9-2.0 billion) including debt, three sources familiar with the deal said on Thursday.

Cinven, which last month bought French medical diagnostics provider Labco LABCO.PA for 1.2 billion euros, beat Apax-owned Unilabs and buyout group EQT in the auction, and a deal may be announced later this week, they added.

BC Partners made a return of 2.7 times on the sale, one person familiar with the deal said.

Cinven and BC Partners declined to comment.

Synlab and Labco will be combined, one of the sources said, adding that the two companies have little overlap and cost cuts are not driving the transaction.

Cinven will use the combined platform to drive growth in a fragmented European laboratory industry.

During its six year ownership, BC Partners strengthened Synlabs with 60 acquisitions, including Austrian FutureLab, Italian Fleming Labs and Germany’s MVZ Leverkusen.

Synlab Chief Executive Bartl Wimmer told Reuters in April that Europe’s two largest players command just 5 percent of the market, compared with a 45 percent market share for the largest two firms in the United States.

“There is potential in Europe for two lab services providers with 2-3 billion euros in sales,” Synlab’s Wimmer said at the time.

The 4.5 billion euro German laboratory market - with standard blood and urine tests accounting for the bulk of services - offers relatively low prices compared with elsewhere in Europe, but is also more consolidated and cost-efficient.

Synlab is the second-largest lab operator in Europe after Australia’s Sonic (SHL.AX), with 756 million euros annual revenue.

The Augsburg-based company is expected to post earnings before interest, tax, depreciation and amortization (EBITDA) of about 145 million euros this year and the deal values it at roughly 12 times that, the sources said.

Peers like Sonic and Quest (DGX.N) trade at multiples of 11.9 and 8.8 times their expected earnings respectively.

The range for the deal’s enterprise value of 1.7-1.8 billion euros mainly stems from different estimates of net debt at the time of closing the deal, one of the sources said.

The acquisition is expected to be backed with around 1 billion euros of debt, in the form of high yield bonds, banking sources said.

Barclays, Deutsche Bank, Goldman Sachs and JP Morgan are expected to lead the financing, the banking sources added.

JP Morgan recently led an 800 million euro bond offering for medical diagnostics firm Labco following its acquisition by Cinven alongside Barclays, Deutsche Bank, HSBC, Morgan Stanley, Natixis and UBS.

Rothschild advised BC Partners on the deal, while Barclays advised Cinven, the sources said.

Reporting by Arno Schuetze; Additional reporting by Claire Ruckin; Editing by Elaine Hardcastle

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