Chicago midmarket private equity firm Linden LLC is buying diagnostics company SeraCare Life Sciences Inc. for about $80.8 million, the sponsor's first ever take-private.
The acquisition, as of now, may be funded entirely by equity from Linden, though the investment may come in the form of debt and equity by the time it closes, according to Linden managing partner Brian Miller.
Linden joined the auction process for the life science tools company after it tapped Lazard as intermediary in August 2011. SeraCare provides diagnostic controls, plasma-derived reagents and molecular biomarkers and contract research services for drug researchers and manufacturers of diagnostic test kits. The company filed for Chapter 11 protection in March 2006 and emerged in May 2007,
Milford, Mass.-based SeraCare "had been on our radar for a couple years," Miller said, and Linden had a "high interest." He said SeraCare has an attractive business in the controls and diagnostics products industry and "a long history of strong customer service" that can provide a base for additional resources and growth.
The $4 per share price offer, which equates to an enterprise value of $82 million on a fully diluted basis, is a 25% premium over the 30-day volume-rated average stock price, said Gregory A. Gould, interim president, CEO and CFO. Linden's offer provides for a 3% breakup fee.
The company's stock closed Monday at about $3.94 per share, up almost 10%. The stock has steadily risen since October, after reaching a year-low of about $2.64 per share.
SeraCare chose Linden over New York hedge fund MSMB Capital Management, which made overtures for SeraCare in the summer. MSMB holds 5% of the company's shares.
Martin Shkreli, founder of MSMB, congratulated the company on a SeraCare conference call with investors. "You ran a great process, and unfortunately we didn't win the options."
Shkreli did not return a call for comment.
The Linden-SeraCare deal is expected to close in the second quarter of this year, as long as investors approve it.
Most investors on a Monday conference call appeared positive about it -- including Shkreli, whose firm had offered to pay $4.25 per share, or $82 million, in June, provided MSMB liked the looks of SeraCare's financials in due diligence.
SeraCare declined to discuss its reasoning behind the choice, other than to say that Linden was the correct strategic fit for the company, based on the premium and the surety of the deal closing.
The Midwest sponsor typically targets companies typically with between $10 to $50 million of Ebitda. But SeraCare is smaller than usual. For the year ended Sept. 31, 2011, operating income for the company was $2.6 million, including stock-based compensation and depreciation and amortization totaling $1.6 million and $1.1 million, respectively.
The firm, whose average equity outlay is in the region of $10 million to $100 million, will invest out of Linden Capital Partners II, a $375 million, vintage 2010 fund. It is the second investment from the fund, after an investment in Lexington, Mass.-based Strata Pathology Services Inc. in July.
Linden, a healthcare specialist, has been known to carve out divisions of public companies in the past. It acquired the MedSystems arm of Cardinal Health Inc. deal for an undisclosed price in 2008 and in February 2010 it bought Hycor Biomedical Inc. from Agilent Technologies Inc., also for an undisclosed sum.
Last year was notable for a number of healthcare take-privates by financial sponsors. Carlyle Group and Hellman & Friedman LLC completed the $3.9 billion take-private of Pharmaceutical Product Development Inc. in October. An investor group led by Apax Partners LLP closed the $6.3 billion take private of medical device company Kinetic Concepts Inc. in November.
Linden received legal advice from Ted Zook, Jerry Nowak and Bob Wilson at Kirkland & Ellis LLP. William Blair & Co. LLC's Brent Felitto, Brian Doyle, Kent Brown, Fritz Buerger and Betty Jin advised Linden.
A Lazard team that included David Low, Jason Bernhard and Alex Lim advised the target. John D. Hancock and Erin Klein from Foley Hoag LLP represented SeraCare.