Affimetrix (AFFX)
$105m($10m) reg unsec sen cb pricing Tues pm from MS/Citi. Terms: 7yr, 3.25-3.75% up 27.5-32.5, pc-after 5yr@130%, prot. UOP=pending eBioscience acq. (If acq falls through, co may redeem at $1010 + interest +75% of diff, if +, betw redemption & initial conv) Market leader in genotyping. $379m mkt cap. 70% of sales – academic & been weak. Acq to improve growth prospects but had been put on hold due to lack of funding. Post deal, liq=tight w/#44 cash. (see credit color). Inputs academic given structure/credit. We’ll use L+900. Not a vol trade. Given 7 yr, we’ll use 32v. Stk brw varies. Using net 50 bps, theo = 97/99.25/101.5. It’s not in our genes to like a marginally mispriced 7 yr credit name, looks like equity, could behave like it too (80d) AVOID
Products for gene expression and genotyping
PF Cash $44m
PF Debt = $190m
LTM EBITDA $8m
LTM FCF -$24m
Leverage 23.8x
Mkt cap = $380m
AFFX is mkt leader in gene exp & genotyping but mkt has been in decline in several years & fell 12% 1Q12. Looking to diversify buying eBioscience. Plan amended for lack of funding & lower sales from weak US academic mkt. Price lowered $15m to $315m & secured debt portion lowered. Plan to use $85m dec debt, $105m convert & $125m cash. Adds cell & protein analysis & has better growth prospects. Liquidity tight with only $44m of cash remaining & uncertainties that come with a merger
Our assigned spread L+900