Thermo Fisher Scientific (TMO) has received clearance from the European Commission regarding the proposed acquisition of Phadia Holdings. The Commission came to the conclusion that the transaction would not give way to monopoly as there are several players in the field of in vitro autoimmune diseases diagnostics.
Earlier this month, Thermo Fisher decided to raise $2.1 billion to partly finance the acquisition of Phadia. The company issued notes in two installments – $1 billion of 2.25% senior notes due 2016 (at an issue price of 99.826% of the principal amount) and $1.1 billion of 3.6% senior notes due 2021 (at an issue price of 99.809% of the principal amount).
In May 2011, Thermo Fisher decided to acquire Phadia for €2.47 billion (approximately $3.5 billion) in cash from European private equity firm Cinven. Phadia, based in Uppsala, Sweden is a leading player in allergy and autoimmunity diagnostics. The deal is expected to be completed in the fourth quarter of 2011 and be EPS-accretive for the company by 26-30 cents in 2012.
Phadia, founded in 1967, operates through two leading brands – ImmunoCAP for allergy tests and EliA for autoimmunity tests. The company recorded €367 million (approximately $525 million) of revenues in 2010 that represents a 3-year compounded annual growth rate of 10% at constant exchange rates.
A strong cash balance helps Thermo Fisher pursue suitable acquisitions or reward its shareholders through share buybacks. The company exited the second quarter with cash and cash equivalents of $1.4 billion compared with $917.1 million at the end of December 2010. The company also spent $225 million to buy back 3.8 million shares during the quarter.
Subsequent to the completion of the deal, Phadia will be part of Thermo Fisher’s Specialty Diagnostics business under its Analytical Technologies Segment. Apart from being able to tap the huge opportunity in the under-penetrated Specialty Diagnostics market of the US, its strong presence in emerging markets should bring in further growth. Meanwhile, banking on PPI and PPI-Lean projects and cost control, operating margins revealed an improving trend. However, the company faces tough competition from players such as Life Technologies (LIFE), among others.
We are currently ‘Neutral’ on Thermo Fisher.
