* Thermo Fisher to pay $76 per share, a 12 percent premium
* Thermo Fisher to assume Life Tech's net debt of $2.2
* Life Tech shares up 7.4 pct; Thermo Fisher down up 0.9 pct
By Bill Berkrot and Susan Kelly
NEW YORK, April 15 Thermo Fisher Scientific Inc
on Monday agreed to buy Life Technologies Corp
for $13.6 billion in a deal that would make it one of the top
two companies in the hot field of genetic testing.
The pact values Life Tech at $76 per share, a 12 percent
premium, and is one of the year's biggest corporate takeovers.
It would catapult Thermo, the world's largest maker of
scientific and laboratory equipment, to the forefront of the
fledgling field of personalized medicine, where research is
uncovering the hereditary underpinnings of diseases to better
tailor treatments to patients.
"Genetic sequencing is an area that will become increasingly
important over the years in terms of specialty diagnostics, and
Thermo needs to compete in that market because they have a
number of products in that area that ultimately could get
displaced by sequencing applications," said Macquarie Capital
analyst Jonathan Groberg.
Thermo Chief Executive Marc Casper said advanced genetic
testing was an important field going forward, and his company
wanted to get into it as an industry leader. Life Tech is
considered No. 2 behind Illumina Inc in the race to
produce faster and less expensive gene sequencing technology.
"We didn't want to be a more distant participant, and this
transaction facilitated us having a stronger position there,"
Casper said in a telephone interview.
Illumina last year rebuffed a $6.8 billion hostile takeover
bid by Swiss drugmaker Roche Holding AG. Shares of
Illumina, which will now have to compete with a far larger rival
with much greater resources, were down nearly 3 percent.
Interest in buying Illumina could heat up again, given the
company's unique position in advanced gene sequencing.
"They've only got one target they can think about," Mizuho
Securities analyst Peter Lawson said of potential buyers.
"There's a lot of experimental technologies out there, but if
you need something that functional, you need either Illumina or
Life Tech's Ion Torrent business."
Both companies have dramatically cut down the time and cost
of sequencing human DNA, a major boon to researchers and
drugmakers developing gene-based diagnostic tests and
treatments. Life Tech's Ion Proton System can complete the
sequencing process, which recently took several days, in a
couple of hours for about $500. The technology has more than
1,000 times the sequencing capacity of Life Tech's original
AN IMMEDIATE PROFIT BOOST
Thermo said the deal would add 90 cents to $1 to its
per-share profit in the first full year, initially sending its
shares higher. After jumping nearly 6 percent, the shares gave
back those gains and were down almost 1 percent at $78.98 in
late afternoon trade on the New York Stock Exchange. Life Tech
shares were up 7.4 percent at $73.05, below the offer price.
Analysts estimate the combined company's 2013 revenue at
about $17 billion. The acquisition will also enhance Thermo's
offerings in the fast growing field of food safety, and its
ability to grow in China and other emerging markets.
"The combined company has significant scale in emerging
markets and scale makes a huge difference there," said Casper,
adding that the deal "will put us in even better position to
grow in the fastest growing regions in the world."
The acquisition is by far the biggest deal for Thermo since
the company was created in the $12.8 billion merger of Thermo
Electron and Fisher Scientific International in 2006. It is also
far larger than the biggest previous deal on Casper's watch -
the $3.5 billion acquisition of Phadia in 2011.
Thermo expects the transaction to close early in 2014,
pending U.S. regulatory and shareholder approvals.
Thermo will assume Life Tech's net debt of about $2.2
billion. In the third year following the deal's closing, Thermo
said it expects to achieve cost savings of $250 million by
consolidating facilities and support functions.
Thermo's products range from basic scientific instruments to
advanced mass spectrometry equipment used to determine the
chemical structure of molecules. It also sells chemicals, agents
and antibodies used in the manufacture and research of biotech
medicine - a line that will be complemented by Life Tech's
product lines - and in recent years has increased its portfolio
of products for testing air and water quality and food safety.
LIFE TECH EXPLORED MANY OPTIONS
Life Tech explored a sale after previous attempts by Chief
Executive Gregory Lucier to boost the value of the company's
stock and capture more market share from Illumina.
Lucier said the company explored many options during a
lengthy strategic review, with the ultimate sale of the company
always one of them. "We are very satisfied both with the process
and the outcome," he said in a telephone interview.
Lucier oversaw the merger of his former company Invitrogen
and Applied Biosystems that created Life Tech.
Life Tech President and Chief Operating Officer Mark
Stevenson is expected to play a significant role in the combined
company, the companies said.
Thermo has obtained committed bridge financing from JPMorgan
and Barclays, which also acted as the company's
Sources familiar with the deal told Reuters that Life Tech
chose Thermo over Sigma-Aldrich Corp, a maker of
chemicals for research laboratories, and a private equity
consortium consisting of Blackstone Group, Carlyle Group
, KKR & Co and Temasek Holdings.
Deutsche Bank Securities and Moelis & Co advised
Wachtell, Lipton, Rosen and Katz and WilmerHale are legal
counsel to Thermo Fisher; Cravath, Swaine and Moore is legal
counsel to Life Tech.