Wednesday, July 6, 2011

TPG to Buy Immucor for nearly $2 Billion

Bloomberg reported:

Immucor Inc. (BLUD), the leading maker of tests to screen blood before transfusions, agreed to sell itself to private-equity firm TPG Capital for $1.97 billion.
 CNBC reported on one hedge fund winner in the TPG deal:

ValueAct Capital, which is Immucor's biggest shareholder, said it supports the transaction. ValueAct is hedge fund that owns 8.9 million shares of Immucor, or 12.7 percent of the company.
And how long has ValueAct owned their stake?  They purchased 3.9 million shares or 5.6% and 756,000 or 1.1% of the class in October 2009, after a precipitous plunge in Immucor's stock price.  A portion of Immucor went to two ValueAct funds based in the British Virgin Islands.  ValueAct bought their second chunk of Immucor in December 2009, with the next coming in February, April, and May 2010.  By last summer ValueAct held over 12% of the company.

When did management and the board start shopping the company?  What role did a hedge fund in encouraging Immucor management to sell out to a private equity underwriter (PEU) at a 30% premium to its stock price?

Immucor has total assets of $597 million.  The purchase price is 3.3 times assets.

There is no information on the amount of debt TPG will float to fund the deal,odd given private equity underwriters use of leverage to fund deals.   A 2% management fee on Immucor's $330 million in annual sales comes to $6.6 million.

Bloomberg added Immucor "offers industry-topping operating margins of 39 percent as well as steady cash flow."  Will TPG sop up Immucor's cash flow and tax liability with interest charges and management fees? Margins will need to grow to cover PEU associated costs.  That means higher prices for customers, cutting non-PEU associated costs like salary and benefits, and finding new markets (which may offer lower production costs, like China).

TPG Capital believes in the growth opportunities presented by our molecular immunohematology offering and by our expansion into new markets around the world.

TPG's Immucor buyout is one of thousands in the health arena.

There have been 2,295 announced or completed acquisitions for health-care products makers in the last five years, according to data compiled by Bloomberg. The companies sold for an average size of $212.6 million and an average premium of 35 percent.
What role have buyouts and associated capital costs played in soaring  health care costs? That question is never asked, much less answered on Capital Hill, where the Reds and Blues love for-profiteers and PEU's.

HCA's PEU owners bled the company for $4.25 billion in dividends before taking it public.  TPG struck a deal with Immucor (BLUD), which screens blood.  Will the company develop a test for PEU dividend bleeding?  Doubtful.  I think that's an internal metric for private equity underwriters, one they don't like to publicly share.  Turn your eyes, nothing going on here...