Denmark’s Novo A/S ups Synlab stake to 20 pct before possible IPO: Reuters

Danish life science investor Novo A/S said on Wednesday it was raising its stake in Synlab to about 20 percent through a 250 million euro ($265 million) subscription to new shares, ahead of a potential listing of Europe’s second largest lab operator.

Novo A/S acquired more than 10 percent of Synlab in December from buyout group Cinven. By increasing its stake, Novo A/S will become the second largest investor in Synlab.

“If the company is listed, we will be in a fine position to keep our level of ownership,” Michael Shalmi, managing director for large investments at Novo A/S, told Reuters.

Novo A/S would focus on the company’s strategy and performance, and did not have strong views on whether Synlab should be listed or remain private, Shalmi said.

“We’ve now reached a fine ownership level which fits our wishes for our long-term investments well,” he said.

Cinven bought Synlab in 2015 in a deal worth 1.8 billion euros including debt and merged it with French Lab chain Labco, which it had bought for 1.2 billion euros in the same year.

Novo’s investment gives Synlab an enterprise value of about 4.5 billion euros, as Synlab’s net debt stood at 2.125 billion euros in December 2016, according to an investor presentation.

Synlab’s valuation of more than 15 times earnings before interest, tax, depreciation and amortization puts it at a premium to European market leader Sonic, which trades at 13 times core 2016 earnings.

European lab operators, providing standard blood and urine tests as well as other medical and veterinary diagnostic services, have been consolidating to cut costs over recent years. Synlab bought 34 laboratories last year.

Europe’s two largest players – Australia’s Sonic and Synlab – command about 5 percent of the European market, compared with the 45 percent of the U.S. market controlled by the two biggest firms in the United States.

Shalmi said capital invested by Novo A/S would fund further acquisitions by Synlab, advancing a consolidation strategy that aims to systemise and industrialise laboratory operations.

Novo A/S, which invests the assets of the 47 billion euro Novo Nordisk Foundation, is the controlling shareholder in Novo Nordisk and Novozymes.

Synlab posted earnings before interest, tax, depreciation and amortization of 292 million euros in 2016 on revenues of 1.6 billion euros.

Cinven declined to comment.