The king of life science acquisitions has struck again.
Thermo Fisher Scientific announced Monday plans to acquire Patheon, a Durham, North Carolina-based contract development and manufacturing organization with 9,000 employees worldwide.
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The news came just hours after Bloomberg published an article stating that the two companies were in talks.
Per the agreement, Thermo Fisher’s board has approved the purchase of all issued and outstanding Patheon shares for $35.00 apiece, an investment of approximately $5.2 billion. Thermo Fisher will also assume around $2.0 billion of net debt.
Patheon shares shot up 33 percent with the news, which brought it close to the $35 share price locked in by Thermo Fisher. The latter’s shares barely moved — up 0.5 percent by noon.
Based in Waltham, Massachusetts, Thermo Fisher Scientific was formed in 2006 through a merger between lab equipment company Fisher Scientific and Thermo Electron, which focused on scientific instruments.
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Since then, it has enveloped more than 30 organizations on its path to becoming the largest global provider of life science research tools and products. It now has $18 billion in revenues each year and 55,000 employees worldwide. As of Monday, its market cap stood at $67.5 billion.
While M&As are clearly not a rare event for Thermo Fisher, today’s $5.2 billion price tag makes this one of the largest. Its $13.6 billion acquisition of Carlsbad, California-based Life Technologies still reigns supreme, however. Announced in 2013, the deal was so large it exceeded Thermo Fisher’s 2012 revenues of $12.51 billion. Life Tech was a competitor of nearby Illumina, specializing in the production of genomic instruments and consumables.
With their IPO, @Patheon will continue to deliver a healthier world pic.twitter.com/6u5mWPQ1kx
— NYSE 🏛 (@NYSE) July 21, 2016
Patheon, on the other hand, came to life through a March 2014 merger between Canadian drugmaker Patheon Inc. and the pharmaceutical business of Dutch vitamin maker Royal DSM NV. In July 2016, the new entity floated on the New York Stock Exchange, raising a massive $640 million through its IPO.
As noted in the today’s announcement, Patheon has a strong foothold in the $40 billion contract development and manufacturing organization (CDMO) market, which comes as an extension of the biopharma trend towards outsourcing.
Customers now want end-to-end solutions, flexible and scalable capacity, and regulatory expertise, the companies noted in a joint statement. With expertise in small and large molecules, manufacturing, and more, Patheon is well placed to serve industry clients looking to work efficiently in a number of fields. Moreover, the deal appears to strengthen Thermo Fisher’s push into services for research and clinical trials.
The deal is projected to close at the end of 2017. By year three, Thermo Fisher expects to realize total synergies of approximately $120 million; around $90 million of cost synergies and approximately $30 million of adjusted operating income benefit from revenue-related synergies.
Patheon will become part of Thermo Fisher’s Laboratory Products and Services Segment once it’s absorbed into the company structure.
Disclaimer: the author of this article worked with Thermo Fisher in a previous role.
Photo: maxsattana, Getty Images
