Thermo Fisher Acquires Life Tech for $13.6B

Thermo Fisher Scientific is paying $13.6 billion, or $76 per share, to acquire Life Technologies and become the global leader in providing life sciences tools, services, and technology. Thermo Fisher also agreed to assume Life’s $2.2 billion of net debt at the close of the transaction.

Thermo Fisher’s winning offer was significantly higher than the $65 per share offer from a consortium of private equity firms, which included Carlyle, KKR, and Blackstone. Thermo Fisher has already obtained committed bridge financing from J.P. Morgan and Barclays to finance the deal, which it expects to be split between about $10 billion of debt and up to $4 billion of equity.

The acquisition of Life Technologies will create enhanced scale and depth of capabilities for customers working in research, specialty diagnostics and applied markets. Of particular interest to Thermo Fisher was Life’s next generation sequencing business Ion Torrent.

“This story is about two industry leaders joining forces to create and even stronger industry leader,” said Thermo Fisher Scientific president and CEO Marc Casper in a conference call following the announcement. Strategically we’re creating a very powerful company, said Casper during the question and answer period. While Thermo Fisher’s growth rate has been in the 4 to 6 percent range, Casper told analysts that the company worked on conservative assumptions when valuing the deal, assuming Life would continue to grow at 3 percent annually going forward. However, it expects the Ion Torrent division to drive future growth.

“We think its an important market, and we had chosen not to participate, but as we know the Ion Torrent franchise well, we like the prospects of the next-gen sequencing business, we understand it is the number two player, but has been gaining ground,” said Casper.

The boards of directors of both companies have approved the deal, citing the combination as complementary and building on the technological strengths of both companies to accelerate results for life sciences customers working in proteomics, genomics and cell biology. The combined company will create increased depth of capabilities for customers working in research, specialty diagnostics, and applied markets, say the companies.

Drivers of the deal for Thermo Fisher include Life’s strong cash flow, its next generation sequencing capability through its Ion Torrent division, and its presence in more than 180 countries, which will enhance Thermo Fisher’s emerging markets capabilities.

“The acquisition of Life Technologies enhances all three elements of our growth strategy: technological innovation, a unique customer value proposition and expansion in emerging markets,” says Casper.

Life Tech CEO Greg Lucier said in the conference call that the deal delivers immediate benefit to Life Tech’s shareholders and is a “tremendous opportunity and best path forward for all.”

Besides offering a range of consumables for genomics, and molecular and cell biology, Life Tech is well-known for its next-generation sequencing capability, and also has a range of technologies for bioproduction and forensics applications. Combined with Thermo Fisher’s offerings in analytical technologies and specialty diagnostics, the combination will create new opportunities to support the convergence of life sciences tools and diagnostics.

Life Tech also conducts and manages more than half of its orders online. During the webcast, Casper noted Life Tech’s strong e-commerce platform and supply chain infrastructure as an important deal driver that would enhance Thermo Fisher’s commercial strength and global reach, especially in Asia.

Thermo Fisher says the deal will allow for $275 million in adjusted operating income synergies in year three following the close, consisting of $250 million of cost synergies and $25 million of revenue synergies. In addition, Thermo Fisher expects the transaction to be significantly and immediately accretive to adjusted earnings per share, expecting it to add $0.90 to $1.00 to the adjusted earning per share in the first full year of combined operation.

The companies hope for a smooth transition and have Life Technologies’ president and chief operating officer, Mark Stevenson, will have a significant leadership role in the combined company. Thermo Fisher also intends to elect a member of the Life Technologies board of directors to the Thermo Fisher board.

The transaction, which is expected to close early in 2014, is subject to a Life shareholder vote and satisfying customary closing conditions, including regulatory approvals