How much is Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), the maker of the PillCam endoscopic capsule for diagnosis of the gastrointestinal system, worth? The company's market cap is $491 million. When the company was put up for sale a few months ago, acquisition offers of $700-750 million were reportedly considered. But the seller, Given Imaging's parent company, IDB Holding Corp. Ltd. (TASE:IDBH), controlled by Nochi Dankner, had apparently hoped for more, maybe even $1 billion, and talks for the sale of the company were terminated. Potential buyers reportedly included Johnson & Johnson (NYSE: JNJ), Fujifilm Holdings Corporation (TSE: 4901), and Samsung Electronics Co. Ltd. (KSX: 5930; LSE: SMSN).
IDB still wants to sell its controlling 46% stake in Given Imaging, but it is doubtful if the company will be able to obtain anything close to a value of $1 billion, especially given a valuation by Fahn Kanne & Co. Grant Thornton Israel for IDB Development Corporation, which was published last week.
IDB Development hired Fahn Kanne to show that the company was not insolvent (as its bondholders claim). Fahn Kanne gave IDB Development a net asset value (NAV) of $400-900 million, which contradicts a valuation by TASC for IDB Development's bondholders, which gave a negative NAV for the company.
Given Imaging was one of the companies that Fahn Kanne assessed, and it gave the company a valuation of $636 million (almost NIS 2.5 billion at the shekel-dollar exchange rate of last September), based on analysis of analysts' recommendations. The valuation reflects a 28% premium on Given Imaging's market cap, but it is far from the hoped-for sale price of $1 billion.
Fahn Kanne's valuation is partly based on a review of Given Imaging by DS Brokerage several months ago, which gives a target price of $20.50 for the share, reflecting a company value of $650 million. The valuation is based on the discounted cash flow model (DCF) for the company.
Fahn Kanne writes that Given Imaging had an average annual growth rate of 9.6% in 2008-12. It says that, in the days following reports about negotiations for a sale of the company (a sale that never materialized), its market cap rose to NIS 2.3 billion. "This figure strengthens the argument about the company's real value, which is higher than its market cap," says Fahn Kanne.
Given Imaging, run by president and CEO, Homi Shamir, posted $180.5 million revenue in 2012, barely changed from 2011. It posted a non-GAAP net profit of $22.6 million, 12% more than in 2011. The company expects to obtain approval to market its next-generation PillCam Colon2 capsule in the US and Japan by the end of this year, which will greatly expand the company's market potential.
Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2013
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