Dialogue Health shareholders should take Sun Life deal, Paradigm says

The Sun Life offer to acquire Dialogue Health Technologies (Dialogue Health Technologies Stock Quote, Chart, New, Analysts TSX:CARE) is “very compelling” for the latter’s shareholders, says Paradigm Capital analyst Daniel Rosenberg.

On Wednesday, CARE announced it had entered into has a definitive arrangement that would see all its shares acquired by Sun Life Financial at a price of $5.15 per share.

“In recent years, Dialogue has developed a strong relationship with Sun Life, Dialogue CEO Cherif Habib said. “This transaction represents an attractive opportunity for the company’s stakeholders. As a stand-alone entity backed by Sun Life, Dialogue will have more resources to deliver on our mission of helping people improve their health and well-being and the flexibility to continue to deliver on our mission by leveraging the respective strengths of both organizations. We are enthusiastic about the prospects of this next chapter in Dialogue’s history.”

With Wednesday’s report, Rosenberg changed his rating on CARE from “Hold” to “Tender”. The analyst explained why he liked the deal, even though he does not see significant synergies between the acquirer and the acquiree.

“We initiated coverage on Dialogue on October 14, 2022 at a price of $2.64, so today’s announced deal represents an attractive return and speaks to the value that strategics are willing to pay,” he said. “We continue to believe in Dialogue’s long-term vision and expect it to emerge a market share leader in digital health and wellness within Canada. Given the very attractive proposal from Sun Life, we are moving to a Tender rating (was Hold) and our target price to $5.15 (was $4.30).”

“At $5.15, the deal represents a 43.1% premium to the previous close and well above the 52-week high of $4.16. We value the transaction at ~3.2x EV/2024 revenue, notable premium to our group of peers trading at 1.7x,” the analysts added. “Though still a far cry from the $12.00 IPO, we view the offer price a very attractive to Dialogue shareholders in the context of the current market environment.”