SYNLAB AG
Moosacher Straße 88
80809 Munich
Germany
Press release
 

SYNLAB plans initial public offering

• Largest European clinical laboratory and medical diagnostic services company intends listing on the Regulated Market (Prime Standard) of Frankfurt Stock Exchange
• Attractive growth profile supported by non-cyclical trends and based on a strategy of customer-centric medical excellence driving organic growth as well as sustained value-accretive M&A growth
• Intended listing and first day of trading expected in Q2 2021, subject to market conditions
• Offering will consist of newly created shares from a capital increase as well as a secondary component from existing shareholders

Munich, 7 April 2021. SYNLAB, the largest European clinical laboratory and medical diagnostic services company, today announced its intention to list its shares on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange. The offering will include newly created shares from a capital increase as well as a secondary component from existing shareholders, which include funds advised by Cinven as well as Novo Holdings, Ontario Teachers' Pension Plan Board and other minority shareholders. The planned initial public offering (IPO) and first day of trading is expected in Q2 2021 and will include a public offer to individual and institutional investors in Germany and private placements in certain other jurisdictions. SYNLAB aims to raise EUR 400 million in estimated gross proceeds from the IPO, which the Group intends to use to repay part of its outstanding debt obligations, resulting in a further reduction of leverage.

"We have delivered a remarkable growth story over the past years. The planned IPO is a consequent next step for us to realise our full potential as a publicly listed company", says Mathieu Floreani, CEO of SYNLAB Group. "We will continue with the diligent implementation of our growth strategy and leverage our medical, operational and commercial leadership in Europe as well as in selected emerging markets to create value for shareholders. Diagnostics will continue to gain importance in the provision of healthcare services as medical practitioners and patients focus more on early detection, prevention and management of diseases. Medical expertise and scientific leadership remain the building blocks of our activity. Our primary purpose is to serve customers by providing accurate test results with the highest possible medical precision, the best help to diagnose and the shortest possible turnaround time."

An industry leader

SYNLAB is the largest European clinical laboratory and medical diagnostic services company by revenue and number of tests performed. The Group provides actionable diagnostic information for healthy lives and well-being for all. With a network of more than 450 laboratories and over 1,600 blood collection points, SYNLAB has direct patient and consumer contact across 36 countries. The Group offers a broad range of more than 5,000 types of testing services in clinical testing, genetic and anatomical pathology testing as well as diagnostic imaging. SYNLAB processes approximately 500 million tests for approximately 100 million patients a year. The Group has over 20,000 employees (FTE), including more than 1,200 medical doctors as well as a large number of other specialists. In 2020, Group revenue reached more than EUR 2.6 billion.

Highly attractive growth market driven by strong non-cyclical trends

SYNLAB is active in a large and growing diagnostic testing market that in 2019 was estimated at over EUR 200 billion worldwide, of which around EUR 90 billion is in regions where SYNLAB operates today. The underlying growth of the market is driven by non-cyclical growth trends such as an aging population, changing lifestyles and an increased frequency of conditions such as allergies as well as long-term chronic diseases. SYNLAB expects rising demand and volumes as healthcare policies increasingly recognise the value of prevention and the medical focus is shifting from treatment to early detection and diagnosis. Over 70% of medical decisions are based on laboratory testing, yet laboratory testing constitutes only an approximately 3% portion of overall total healthcare expenditures.

Focus on customer-centric medical excellence: organic growth driven by delivering superior service to patients and clinicians

SYNLAB builds its activities on medical expertise and scientific leadership. The Group is dedicated to serving customers with accurate test results with the highest possible medical precision, the best help to diagnose and the shortest possible turnaround time. SYNLAB offers a full spectrum of testing from routine to highly specialised tests. More than 1,500 of these tests have been developed in-house and over 300 medical publications were issued by the Group in the last three years. In addition, the Group has established a proprietary medical community network and maintains numerous partnerships with universities. This enables it to constantly reflect the latest research and scientific advancements in the development of its business.

SYNLAB provides a tailored approach to prescribers and focuses on retail management, with several key initiatives under its "For You" growth strategy. These growth areas include precision medicine and genetics counselling, further expansion of the direct-to-consumer activity through an internationally available online platform as well as innovative solutions in the on-going digitisation of the healthcare sector.

Since the beginning of the COVID-19 pandemic the Group has leveraged its strong platform and partnered with national healthcare systems and governments to develop and roll-out SARS-CoV-2 tests and procedures. The Group was the first provider in Europe to offer industrialised PCR testing for SARS-CoV-2. Based on its swift adaptability, innovation capabilities and its robust supply chain, the Group ramped up SARS-CoV-2 PCR and non-PCR monthly testing capacity in 2020 with testing volumes rising from 100,000 tests in March up to 2.6 million in December. Overall, SYNLAB conducted 11.6 million PCR tests in 2020.

The Group expects testing to remain a central pillar of national COVID-19 responses in the long-term even as vaccination campaigns have begun. As with many other infectious diseases, consistent surveillance will be a crucial factor to prevent a resurgence.

Strong position to support further consolidation

SYNLAB Group was formed in 2015 through the combination of SYNLAB and Labco. Since then the Group has successfully closed and integrated more than 100 acquisitions and extended its international footprint into seven additional countries.

SYNLAB operates an integrated "hub and spoke" laboratory model utilising centralised laboratories combined with geographically distributed base laboratories and collection centres, allowing it to scale up quickly. The Group can achieve significant economies of scale with acquired businesses thanks to laboratory network optimisation, process improvement, back-office centralisation, insourcing of specialty tests and procurement optimisation.

SYNLAB will continue its external growth strategy as an active consolidator in the highly fragmented European medical diagnostics market. This will be supported by approximately EUR 200 million of M&A spending per annum on average.

Strong track-record of value creation and clear roadmap

SYNLAB operates a network of highly efficient laboratories, continuously reinforced through its programme of operational excellence. This model shows strong operating leverage with profit growth consistently higher than top line growth; over the last ten years, the Group achieved a total revenue CAGR of 11% and a total adjusted EBITDA CAGR of 19%.

In 2020, the Group's 38% revenue growth, which was supported by high demand for SARS-CoV-2 testing and organic developments, translated into 71% adjusted EBITDA growth to EUR 679 million as well as 99% adjusted operating profit growth to EUR 504 million. Unlevered free cash flow rose to EUR 272 million and was driven by high cash conversion and disciplined capital expenditure.

The strong cash generation profile of SYNLAB supports continued organic growth and acquisitions, while maintaining a sound capital structure. The Group intends to use the net proceeds from the sale of the newly created shares in the IPO to repay certain of its outstanding debt obligations, resulting in a further reduction of leverage with a net financial debt to adjusted EBITDA leverage ratio target of below 3.0x in the mid-term.

Going forward, SYNLAB expects revenue growth of approximately 10% per annum^[1] in the mid-term, including organic growth of 3%+ per annum and M&A growth. Strong operating leverage is expected to support an adjusted EBITDA margin of approximately 23%, while a cash conversion ratio of 45-50% is expected to translate into high free cash flow generation.

The Group currently targets a dividend pay-out ratio of 20-30% of the prior year's adjusted net profit, with the first dividend expected to be paid in 2022.

In 2021, SYNLAB expects revenues of more than EUR 3 billion. This translates into expected total revenue growth of approximately 17%, which includes organic growth of approximately 10% (excluding the expected impact of COVID-19). The Group expects organic growth to be significantly enhanced by the recent commencement of services under its new 15-year partnership agreement with Guy's and St Thomas' NHS Foundation Trust and King's College Hospital NHS Foundation Trust in South East London. Unlevered free cash flow (pre-M&A) is expected to amount to EUR 300 to 350 million.

As SYNLAB can only be economically successful in the long-term if it also effectively manages the environmental, social and governance (ESG) aspects of its activity, the Group has established processes and reporting that focus on continuously improving management practices as part of a long-term commitment towards all stakeholders. SYNLAB has recently released its first public ESG report which provides an overview of the company's ESG practices and mid-term commitments, while also highlighting the progress made during 2020.

Details of the Offering

The offering will consist of newly created shares from a capital increase as well as a secondary component from existing shareholders. SYNLAB aims to raise gross proceeds of EUR 400 million from the sale of the newly created shares placed in the offering.

Goldman Sachs and J.P. Morgan are acting as Joint Global Coordinators and Joint Bookrunners. BofA Securities, Deutsche Bank, Barclays, BNP PARIBAS, HSBC, Jefferies and UniCredit Bank AG have been mandated as Joint Bookrunners. Crédit Agricole CIB and Natixis are acting as Co-Lead Managers. Lilja & Co. is the independent advisor to the shareholders and SYNLAB.

Media Webcast
On the occasion of the publication of this intention to float announcement, SYNLAB Group will host a media webcast today at 10:30 am CET. Media representatives who are interested in participating are requested to register through the SYNLAB IPO tab of the SYNLAB Website (www.synlab.com) to receive further information and dial-in details.

About SYNLAB Group

• SYNLAB Group is the largest European clinical laboratory and medical diagnostic services provider by revenue and number of tests. SYNLAB offers a full range of innovative and reliable medical diagnostics for patients, practising doctors, clinics and the pharmaceutical industry.
• Providing the leading level of service within the industry, SYNLAB is the partner of choice for diagnostics in human and veterinary medicine. The Group continuously innovates medical diagnostic services for the benefit of patients and customers.
• SYNLAB operates in 36 countries across four continents and holds leading positions in most markets. More than 20,000 employees (FTE), including over 1,200 medical experts, as well as a large number of other specialists such as biologists, chemists and laboratory technicians, contribute every day to the Group's worldwide success. SYNLAB carries out approximately 500 million laboratory tests per year and achieved Group revenues of EUR 2.6 billion in 2020.
• More information can be found on www.synlab.com

For more information:

Information relating to financial terms

This announcement includes certain financial measures that are not presented in accordance with IFRS or any other internationally accepted accounting principles.

Organic growth: Represents SYNLAB's revenue growth for a given period compared to the comparable period of the prior year for the same scope of businesses. When calculating organic growth, SYNLAB uses the scope of businesses that have been consolidated in the Group's financial statements for the previous financial year and remain within the scope of consolidation for the current year. Revenue contributions from businesses acquired in the course of the prior year but not consolidated for the full year are presented as if they had been consolidated as from 1 January of the prior year. The revenue contribution from businesses acquired since 1 January of the current year are excluded from the calculation.

Adjusted operating profit: Represents net profit for the period from continuing operations before net finance costs, income tax expenses, amortisation of customer relationships, separately disclosed items that are not considered indicative of operations or may impact comparability, share-based payments and other items considered to be non-underlying.

Adjusted EBITDA: Represents adjusted operating profit (as described above) before depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of other intangible assets.

Net financial debt: Represents the Group's interest-bearing loans and borrowings less cash and cash equivalents.

Unlevered free cash flow: Represents cash flow from operating activities of continuing operations, adjusted for purchase of intangibles and property, plant and equipment, proceeds from sale of intangibles and property, plant and equipment, and lease repayments.

Disclaimer

This release is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada or Japan. It does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States, Australia, Canada or Japan. The shares mentioned herein have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"). The shares may not be offered or sold in the United States, except pursuant to an exemption from the registration requirements of the Securities Act. There will be no public offer of shares of SYNLAB AG (the "Company") in the United States.

This release constitutes neither an offer to sell nor a solicitation to buy shares of the Company. A public offer in Germany will be made solely on the basis of a securities prospectus which is yet to be published. An investment decision regarding shares of the Company should only be made on the basis of such securities prospectus. The securities prospectus will be published promptly upon approval by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) and will be available free of charge on the IPO website of SYNLAB AG (https://ag.synlab.com).

In any EEA Member State, other than Germany, this communication is only addressed to and is only directed at "qualified investors" in that Member State within the meaning of Article 2(e) of Regulation (EU) 2017/1129.

This release may in the United Kingdom only be distributed to, and is only directed at, persons who are "qualified investors" within the meaning of Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018, and who are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or (ii) persons falling within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations, etc.) (all such persons together being referred to as "Relevant Persons"). This release is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity in shares of the Company is available only to Relevant Persons and will be engaged in only with Relevant Persons.

This release contains forward-looking statements. These statements are based on the current views, expectations, assumptions and information of the management of the Company. Forward-looking statements should not be construed as a promise of future results and developments and involve known and unknown risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements, and neither the Company nor any other person accepts any responsibility for the accuracy of the opinions expressed in this release or the underlying assumptions. The Company does not assume any obligations to update any forward-looking statements. Moreover, it should be noted that all forward looking statements only speak as of the date of this release and that neither the Company nor Goldman Sachs Bank Europe SE, J.P. Morgan AG, BofA Securities Europe SA, Deutsche Bank Aktiengesellschaft, Barclays Bank Ireland PLC, BNP PARIBAS, HSBC Trinkaus & Burkhardt AG, Jefferies GmbH, UniCredit Bank AG, Crédit Agricole Corporate and Investment Bank and Natixis (together, the "Underwriters") or their respective affiliates as defined under Rule 501(b) of Regulation D under the Securities Act ("affiliates") assume any obligation, except as required by law, to update any forward looking statement or to conform any such statement to actual events or developments.

Each of the Company and the Underwriters and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this release, whether as a result of new information, future developments or otherwise.

Certain sources of market data included in this release were prepared before the renewed outbreak of the COVID-19 pandemic and have not been updated for the potential effects of the ensuing developments. The Company and the Underwriters are not able to determine whether the third parties who have prepared such sources will revise their estimates and projections due to the potential further impact of COVID-19 on future market developments.

The Underwriters are acting exclusively for the Company and the selling shareholders and no-one else in connection with the planned offering of shares of the Company (the "Offering"). They will not regard any other person as their respective clients in relation to the Offering and will not be responsible to anyone other than the Company and the selling shareholders for providing the protections afforded to its clients, nor for providing advice in relation to the Offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the Offering, the Underwriters and their respective affiliates may take up a portion of the shares offered in the Offering as a principal position and in that capacity may retain, purchase, sell, offer to sell for their own accounts such shares and other securities of the Company or related investments in connection with the Offering or otherwise. Accordingly, references in the international offering memorandum, once published, to the shares being offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Underwriters and their respective affiliates acting in such capacity. In addition, the Underwriters and their respective affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which the Underwriters and their respective affiliates may from time to time acquire, hold or dispose of shares of the Company. The Underwriters do not intend to disclose the extent of any such investment or transactions, other than in accordance with any legal or regulatory obligations to do so.

None of the Underwriters or any of their respective affiliates or any of their or any of their affiliates' respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this release (or whether any information has been omitted from the release) or any other information relating to the Company or its subsidiaries, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, or for any loss howsoever arising from any use of this release or its contents or otherwise arising in connection therewith. ^[1] Using 2019 as the base year