The Synlab laboratory chain is aiming to enter the Frankfurt stock exchange floor. Most recently, the company also benefited from the pandemic: Synlab made a quarter of sales with corona tests.

Synlab biologists at Covid tests in France

Dhe Covid crisis is driving one of the major IPOs in Frankfurt. The laboratory chain Synlab, which recently achieved a quarter of its sales with Corona business, officially announced it would go on the floor on Wednesday. As reported by the FAZ in September, the owners, under the leadership of financial investor Cinven, resumed their stock market plans in autumn and mandated the consultancy Lilja to do so. After a number of acquisitions in recent years, Synlab sees itself as the largest laboratory chain in Europe and, according to its own information, expects long Covid tests to be needed even after successful vaccination campaigns.

The initial listing is planned for the second quarter. New shares from a capital increase alone should bring in 400 million euros, as Synlab CEO Mathieu Floreani said on a conference call. He left it open how many shares the previous owners will offer to the market. In any case, the total proceeds are likely to be much higher. In addition to Cinven, the Canadian pension fund Ontario Teachers’ Pension Plan and Novo Holdings are also involved in Synlab – as well as members of management, in line with the practice of private equity. According to the usual calculation based on operating income, Synlab is worth several billion euros.

Synlab initially postponed its IPO due to the health crisis last year. The company is now benefiting greatly from the need for PCR tests and other tests for the coronavirus. Sales rose last year by almost two fifths (38 percent) to 2.6 billion euros. Of this, the Covid business accounted for 620 million euros. Earnings before interest, taxes, depreciation and amortization (Ebitda) rose by 71 percent to 679 million euros within the year.

“We expect a higher Covid-19 contribution”

Corona business is expected to grow this year. The prices for PCR tests are reportedly falling, but sales are increasing. “We expect a higher Covid-19 contribution,” said CFO Sami Badarani. According to management, the effect will not disappear even after nationwide vaccinations: “We have seen a long-term need for monitoring with every infectious disease,” said Floreani. The same is expected for Covid-19.

In the fall, the owners appointed Goldman Sachs and JP Morgan as investment banks to take the lead in organizing the IPO. Synlab is a particularly vivid example of a “buy-and-build” story of private equity: In this concept, financial investors acquire a company that they use as a platform for acquisitions, ideally in a fragmented market. In 2015, Cinven bought the French Labco from the investor 3i for 1.2 billion euros, shortly afterwards acquired Synlab, which was then based in Augsburg, from BC Partners – for 1.7 to 1.8 billion euros according to financial sources – and merged the two . There were soon talks about a merger with another major competitor, but these failed.

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The company, which is now based in Munich, has continued to buy on a smaller scale. In the four-year period from 2016 to 2019, Synlab spent an average of 200 million euros annually on it, Badarani said in the conference call on Wednesday. It should continue with such annual average amounts. Acquisitions will account for the lion’s share of growth, according to the information: Synlab is aiming for 10 percent more sales annually, of which organic growth accounts for 3 percentage points. The aim is to wrest business from competitors, i.e. to gain market share, and also to develop emerging markets as markets, it said.

First dividend payment in 2022

Private shareholders and institutional investors are to have a say in the IPO. According to the statements made on Wednesday, you can receive your first dividend payment in 2022 – as a profit distribution for the current year. The quota should be 20 to 30 percent of the net profit. Synlab wants to use the proceeds to pay off debts. The level of debt – which was 3.3 times Ebitda at the end of 2020 and twice as high at the end of 2019 – is expected to fall below three times in the medium term.

The company employs 20,000 people, operates 450 laboratories and almost four times as many sampling points, and delivers 500 million test results from 100 million patients annually. Synlab gives the estimated global market volume at 200 billion euros, of which 90 billion euros were allocated to regions in which the company is active. The company carried out 100,000 corona tests in March of last year, and 2.6 million in December.

The records on the German stock market are currently attracting a number of companies to the stock exchange. In March, the Vodafone-Funkturm subsidiary Vantage Towers, with a valuation of more than 12 billion euros, managed the largest IPO in this regard since 2018. The online used car dealer Auto1 had a market value of 8 billion euros. More IPOs are expected before the summer, including those of the online car dealer MeinAuto, the software company Suse and the internet dealers About You and Mr. Spex.