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: Synlab targets $6 billion market capitalization in Frankfurt IPO as COVID-19 testing booms

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Synlab has set the price range for its planned initial public offering in Frankfurt at €18 to €23 a share, giving Europe’s largest laboratory services provider a market capitalization of up to €5 billion ($6 billion) as it looks to cash in on strong demand for its COVID-19 testing capacities.

Munich-based Synlab said in a statement on Monday that it will offer up to 71.5 million ordinary shares, leading to a total IPO size of up to €1.48 billion.

The company aims to raise €400 million in the IPO, the proceeds of which will be used to pay down debt. Existing shareholders, which include private equity group Cinven, Danish investor Novo Holdings, and Canadian pension fund Ontario Teachers’ Pension Plan Board, will also sell down their stakes.

Read: Over-the-counter, 15-minute COVID-19 tests are coming to a store near you — and this is how much they’ll cost

Cinven bought Synlab for €1.7 billion from rival buyout group BC Partners in 2015 and then merged it with France-based Labco to create Europe’s largest lab services company, handling around 500 million tests a year for 100 million patients.

Synlab Chief Executive Mathieu Floreani said the current COVID-19 pandemic had highlighted the importance of medical diagnostic services. “It also proved how Synlab is generally able to quickly apply both medical and operational leadership based on our position as a European market leader with a unique and growing international footprint,” he said.

The company said it conducted 11.6 million polymerase chain reaction (PCR) tests for COVID-19 during 2020. Governments, including the U.K., have made PCR tests mandatory for international travel as countries start to ease lockdown restrictions.

Synlab plans to continue to grow through acquisitions, consolidating the “highly fragmented” European medical diagnostics market. It has set aside €200 million to spend on mergers and acquisitions a year.

Read: British biotech Oxford Nanopore prepares for $3 billion London IPO

High demand for coronavirus testing helped increase Synlab’s revenue by 38% in 2020 to more than €2.6 billion, while adjusted earnings grew 71% to €679 million. The company expects revenue of more than €3 billion in 2021. The group is targeting a dividend payout ratio of 20% to 30% of the prior year’s adjusted net profit, with the first dividend expected to be paid in 2022.

Goldman Sachs
GS,
+1.11%

and JPMorgan Chase & Co.
JPM,
+0.74%

are acting as joint global coordinators on the IPO. BofA Securities
BAC,
+1.06%
,
Deutsche Bank
DB,
+2.12%
,
Barclays
BARC,
-0.11%
,
BNP Paribas
BNP,
+0.13%
,
HSBC
HSBC,
+1.09%
,
Jefferies
JEF,
+2.04%

and UniCredit
UCG,
+1.20%

are joint bookrunners. Crédit Agricole and Natixis
KN,
+0.39%

are co-lead managers. Lilja & Co. is the independent adviser to Synlab and its shareholders.

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