Synlab, Holders Seek $1.8 Billion As Covid Testing Ramps Up

(Bloomberg) -- German laboratory operator Synlab AG and its shareholders are looking to raise as much as 1.48 billion euros ($1.8 billion) in a stock-market listing in Frankfurt, capitalizing on a boom in coronavirus testing.

Synlab aims to raise 400 million euros in the initial public offering to repay debt, while shareholders including private equity firm Cinven, Danish investor Novo Holdings A/S and the Ontario Teachers' Pension Plan Board also plan to sell shares, the company said in a statement Monday.

Shares in the IPO will be marketed at 18 euros to 23 euros through April 27, with the stock set to start trading on April 30. The listing of as much as a third of the company is expected to value it at up to 5 billion euros.

Cinven bought Synlab for 1.7 billion euros in 2015 from BC Partners and merged it with France-based Labco. The company processes about 500 million tests for approximately 100 million patients a year.

The company, which conducted 11.6 million PCR tests for Covid-19 in 2020, is betting on testing remaining central to the response to the pandemic in the long run, even as vaccinations pick up pace. The polymerase chain reaction test that can identify variants has been made mandatory by countries such as the U.K. for international travel.

Synlab is also looking to grow through acquisitions, acting as a consolidator in the fragmented European medical diagnostics market. The company has earmarked 200 million euros for its average annual M&A budget. The company, which also offers clinical, genetic, anatomical pathology testing and diagnostic imaging, is a play on the shift in medical science to early detection and diagnosis.

The company plans to sell as many as 22.2 million new shares, while shareholders will offload 27.5 million shares. The offering includes an option to increase the total deal size by as many as 12.4 million existing shares if there's sufficient demand. Holders may also sell another 9.3 million shares to cover over-allotments.

High demand for coronavirus testing pushed up the company's revenue by 38% in 2020 to more than 2.6 billion euros, while adjusted earnings grew 71% to 679 million euros. It expects revenue of more than 3 billion euros in 2021. The company plans to pay out 20-30% of the prior year's adjusted net profit as a dividend, with the first such payment expected in 2022.

Synlab also named the members of its new supervisory board, including David Ebsworth, a former CEO of Swiss drug company Galenica AG who will serve as chairman.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are joint global coordinators. Bank of America Corp., Deutsche Bank AG, Barclays Plc, BNP Paribas SA, HSBC Holdings Plc, Jefferies and UniCredit SpA are joint bookrunners. Credit Agricole SA and Natixis SA are co-lead managers. Lilja & Co. is the independent adviser to Synlab and its shareholders.

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