Thermo Fisher's Big Acquisition
courtesy
Marc Casper, president and CEO of Thermo Fisher
Waltham-based Thermo Fisher Scientific, which has facilities in Franklin and Milford, will grow by nearly a third early next year when it acquires a California-based biotechnology manufacturer for $13.6 billion.
The intended purchase of Life Technologies is Thermo's largest deal since 2006 and is expected to increase its position in the DNA sequencing market. The deal is expected to close early next year.
The Financials
Thermo Fisher will use a combination of available cash, equity and debt to make the acquisition. The $13.6-billion price tag represents a per-share-price of $76, which is a 12 percent premium over Life's April 12 closing share price.
Thermo said the acquisition would generate greater cash flow, which over the next several years would largely go to paying down the $2.2 billion of Life's debt incurred in the deal.
Combined 2012 revenue for the two companies is approximately $16.3 billion, according to financial filings. Life's revenue represents about 30 percent of that figure.
After an acquisition-heavy 2011, Thermo only acquired one company in 2012 – transplant diagnostics firm One Lamba Inc. – in a $925 million deal. The Life acquisition would be its largest transaction since 2006, when the $12.8 billion merger of Fisher Scientific and Thermo Electronic created the company's current namesake.
Complementary Offerings
More than 80 percent of Life's revenue comes from consumable products for the life science industry, including lab tools for gene expression, cellular research and sample preparation. Meanwhile, Thermo's leading revenue drivers are its analytical technologies and lab products and services divisions.
Together, Thermo and Life would have more than $16 billion in annual revenue, 50,000 employees across the world and the largest research and development budget in the industry, executives for each said on a conference call Friday.
"Very simply put this is a story about 2 industry leaders joining forces to create an even stronger industry leader," said Marc N. Casper, Thermo's president and CEO. "We look forward to adding 10,000 new colleagues to our team."
Thermo said it expects to generate $275 million in operating synergies by 2017, achieved by eliminating redundant public company reporting costs and consolidating some facilities (though it did not say which).
Next Generation Sequencing
The acquisition of Life comes with the company's DNA sequencing technology, called Ion Torrent, which Life acquired in 2010 for $375 million.
Instead of using light to sequence DNA, Ion uses semiconductor technology to translate chemical signals into digital information, according to Life's website. The goal is to reduce sequencing costs.
"Just as the microprocessor enabled desktop computing to displace the mainframe, Ion Torrent semiconductor technology will inevitably democratize sequencing, putting it within the reach of any lab," Life's website says.
While Thermo has been a supplier of reagent for some sequencing companies, its purchase of Life will launch it squarely onto a short list of the biggest players in the rapidly evolving space.
Desktop sequencing is dominated by California-based Illumina, which is a major competitor of Life's.
"We like the prospects of the next generation sequencing business," Casper said. "We understand it's a No. 2 player, but it has been gaining share recently and has exciting technologies in the pipeline."
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