Synlab rides Covid to a planned IPO

On the 04/08/21 at 7:33AM


Olivier Pinaud

The Cinven-controlled lab group, whose revenues doubled in 2020, targets a valuation of almost €6bn.

Like Cerba Healthcare, which recently onboarded new shareholders in a deal valuing it at more than €4.5bn, Synlab plans to capitalise on the Covid-driven spike in its revenues and earnings. The biological analysis labs group on 7 April announced plans to float its shares in Frankfurt sometime in the second quarter. It has two objectives: to raise €400m for acquisitions by issuing new shares; and to provide its current shareholders with an exit opportunity, including Cinven, Novo Holdings and the Ontario Teachers pension fund. The number of shares sold in this secondary offering has not been determined.

According to Reuters, Synlab could reach a €6bn valuation, including debt, which came to €2.2bn as of the end of 2020.

The deal looks promising for current shareholders of the German group. Cinven bought Synlab for €1.7bn in 2015 from BC Partners, then merged it with the French company Labco, thus creating Europe’s largest lab services provider, with about 500m tests annually for 100m patients.

Driven by heavy demand for Covid-19 tests, Synlab did very well in 2020. Its revenues soared by 37.5%, to €2.62bn. In the fourth quarter alone, they spiked by 85%. In France, where it generates about one quarter of its revenues, revenues rose by even 92%. Synlab processed almost 14m Covid tests (PCR and non-PCR), generating more than €800m euros in revenues, which offset by far Covid’s impact on its traditional businesses, including the temporary closing of blood-testing centres. Synlab estimates that without Covid, revenues would have risen by 3.5% to 4% in 2020 on an organic basis.

The extra business naturally boosted profits. Synlab’s adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) jumped by 71%, vs. 2019, to €679m, and it generated €335m in operating cash flow. All in all, with its asset divestments, it almost halved its net debt, allowing it to go to market with leverage (net debt divided by EBITDA) of just 3.3.

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