Amid speculation that Mallinckrodt is seeking strategic alternatives, Jefferies analyst Anthony Petrone explored leveraged buyout scenarios in order to gauge the feasibility of a sponsor-led transaction.

His work shows that within a $60-$75 per share takeout range, sponsors can clear a 30% internal rate of return hurdle under "modest assumptions" with upside to 45%-plus when engineering scenarios are considered. The largest risks to the LBO assumptions are around stability in Acthar pricing and the competitive landscape, Petrone tells investors in a research note.

The analyst keeps a Buy rating on Mallinckrodt with a $70 price target. The specialty pharmaceutical company closed yesterday up 5%, or $1.94, to $43.64.