Thermo Fisher to buy Life Technologies for $13.6b
One of 2013’s biggest buyouts
Thermo Fisher Scientific Inc.'s $13.6 billion deal to buy a California diagnostics firm will establish the Waltham company as the global leader in life sciences tools and a top player in the emerging field of genetic screening.
The buyout of Life Technologies Corp., unveiled Monday, would be the third-largest acquisition ever by a Massachusetts company, trailing only Boston Scientific Corp.'s $26.9 billion purchase of Guidant LLC in 2005 and FleetBoston Financial Corp.'s $16.2 billion acquisition of BankBoston Corp. in 1999, according to research firm Standard & Poor's Capital IQ.
It is one of the biggest US buyouts so far in 2013 and the largest ever for Thermo Fisher, exceeding even the the $12.4 billion deal that formed the company in 2006 through the merger of Thermo Electron Corp. and Fisher Scientific International Inc. In a research note, Peter Lawson, health care analyst for investment firm Mizuho Securities USA in New York, summarized the Life Technologies deal as an "800-pound gorilla becomes King Kong" in the lab equipment market.
The purchase agreement caps a string of acquisitions over the past five years for Thermo Fisher, a leader in supplying medical instruments and technology to laboratories around the world. Under the financial terms of the deal, Thermo Fisher would pay $76 a share for Life Technologies and assume its debt, $2.2 billion at the end of last year.
The companies, which do business worldwide, said the deal, which requires regulatory approval from US and foreign governments, is expected to close early next year.
Shares of Thermo Fisher fell 1.3 percent to close at $78.58 on the New York Stock Exchange. Life Technologies shares rose 7.5 percent, closing at $73.11 on the Nasdaq exchange.
"This deal fits into the corporate strategy of Thermo to be the leading life sciences supplier," said Dan Leonard, director of life sciences tools and diagnostics for Leerink Swann, a Boston health care investment bank. "Life Technologies is strong in a lot of product areas that were gaps in Thermo's portfolio, particularly genetic analysis."
Based in Carlsbad, Calif., Life Technologies has been a leading seller of DNA-sequencing tests, a key technology in the emerging field of personalized medicine, which seeks to customize treatments based on patients' genetic makeup.
In January, Life Technologies struck a partnership with Boston Children's Hospital, the nation's largest pediatric research medical center, to jointly form a company to develop tests for pediatric diseases and interpret results. That company, Claritas-Genomics, will be based in Waltham, where Harvard-affiliated Boston Children's Hospital opened a genetics diagnostic lab two years ago.
While it looms large in the medical research world, Thermo Fisher has a relatively low profile, partly because it doesn't sell to consumers and partly because it markets hundreds of smaller products rather than a few well-known larger ones. Thermo Fisher chief executive Marc N. Casper said in an interview that the Life Technologies transaction will strengthen his company financially but is not expected to create many jobs in Massachusetts in the short term.
"The company continues to get stronger, and that's obviously a benefit for Massachusetts," Casper said. "In terms of employment, things will be stable."
Thermo Fisher has about 39,000 employees worldwide, including nearly 1,500 in Massachusetts.
If it completes the purchase, Thermo Fisher's global workforce would grow to about 50,000. The combined company would generate annual revenues estimated at $16 billion.
Casper, who took over the top job at Thermo Fisher in 2009, has been busy buying smaller laboratory gear and diagnostics companies, boosting the company's research spending and expanding into overseas markets. Under his direction, the Waltham lab equipment giant has acquired companies in niche fields from allergy diagnostics to testing for drinking water contaminants.
But the purchase of Life Technologies dwarfs any of those transactions positioning Thermo Fisher at the forefront of a field that is expected to grow rapidly in coming years.
Analysts said the $13.6 billion price tag was richer than anticipated, partly because they believed Thermo Fisher outbid a consortium of private equity firms led by Blackstone Group LP, as well as a rival lab supplier that hasn't been identified.
"I'm surprised at the price," said Leerink's Leonard. While he said Thermo Fisher could make the deal work, he added, "The risk [of overpaying] is certainly higher when there are three bidders."
Casper said the deal would create "significant value for our shareholders" by helping to cement Thermo Fisher's technology leadership and global reach.
He estimated that revenues from Life Technologies businesses would grow about 3 percent a year, a projection he described as conservative. Thermo Fisher's own businesses historically have grown at a rate of 4 to 6 percent a year.
Life Technologies hired a pair of investment banks early this year to seek a buyer. "The combination of Life Technologies and Thermo Fisher Scientific is a tremendous opportunity and the best step forward for our shareholders," Life Technologies chief executive Gregory T. Lucier told investors Monday.
While Lucier is expected to leave the company when the purchase takes effect, the parties said that Mark P. Stevenson, the California company's president and chief operating officer will take "a significant leadership role" in the combined company.
The company also is establishing a retention program that will enable it to keep talented Life Technologies scientists during the transition.