Finally, the much hyped takeover battle for
Life Technologies Corporation
) came to an end on Monday with
Thermo Fisher Scientific
) emerging as the clear winner. The latter disclosed that it will
acquire Life Technologies for roughly $13.6 billion (or $76 per
share), plus the assumption of Life Technologies' net debt ($2.2
billion as of year-end 2012).
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Rumor has it that Life Technologies preferred Thermo Fisher as a
potential buyer against the consortium of private equity firms.
Thermo Fisher was not willing to lose its chance to become an
unparalleled industry leader to other potential buyers.
While the news of the deal sparked market optimism during early
trading hours for both the companies, Thermo Fisher was in the
red for the rest of the day. Nonetheless, the materialization of
the bidding boosted investor sentiments helping Thermo Fisher and
Life Technologies reach their respective 52-week highs of $84.55
and $73.50 on Monday.
From the financial perspective, the buyout is expected to be
immediately accretive to Thermo Fisher's adjusted earnings by 90
cents to $1.00 within the first full year of the takeover.
Further, the acquisition is expected to create significant cost
and revenue synergies for the company with adjusted operating
income synergies of $85 million in the first year.
Within three years of the completion of the acquisition, Thermo
Fisher envisages adjusted operating income synergy of $275
million comprising $250 million and $25 million of cost and
revenue synergies, respectively. Apart from strong cash flow, the
company also expects adjusted return on invested capital (ROIC)
to surpass the cost of capital by the fourth year.
Thermo Fisher expects to close the acquisition in early 2014,
subject to standard closing conditions and Life shareholder vote.
The total price of the purchase of $13.6 billion includes cash
and debt of $9.5-$10.0 billion and as much as $4.0 billion in
equity. Thermo Fisher obtained the bridge financing from
For most of the last 7 years, Thermo Fisher has supported its
business momentum by acquiring several entities. Nevertheless,
the acquisition of Life Technologies is the biggest ever deal for
Thermo Fisher, since its inception in 2006. This acquisition,
through a highly competitive bidding process, has helped the
company prove its strength to continue with acquisitions and grow
Given Life Technologies' expansive line of consumables for
genomic, and molecular and cell biology, the buyout will
complement Thermo Fisher's market-leading portfolio of analytical
technologies and specialty diagnostic. The takeover will
seamlessly strengthen Thermo Fisher's global foothold and
The acquisition will create a kingpin in the research, specialty
diagnostics and applied markets. As per management at Thermo
Fisher, the acquisition supports its three-pronged growth
strategy of technological innovation, a unique customer value
proposition and expansion in emerging markets.
In addition, substantial expansion in the Asia-Pacific market,
mainly China, is in the cards for the company. Given the huge
potential in the region and high growth rate in China, Thermo
Fisher is likely to exceed its goal of garnering 25% revenues
from the high-growth Asia-Pacific region and emerging markets by
What's in it for LIFE?
The takeover should leverage Life Technologies' attractive
revenue profile. It also looks forward to gain a competitive edge
over other players in the market.
Despite the recent bullish run of Life Technologies, its closing
price of $68.00 on Friday lagged well behind the price tag of $76
per share. Thus, the deal rewards Life Technologies shareholders.
Even the new 52-week high of $73.50 underlines a premium, making
the stock still appealing for investors. This Zacks Rank #2 (Buy)
stock might still be worth a look at the current price.