The acquisition values Life Technologies at $76 per share and would catapult Thermo Fisher into the hot field of genetic sequencing where researchers, drugmakers and doctors are uncovering the genetic factors underpinning diseases to better tailor treatments to the patients.
Life Technologies' board met on Saturday to review three takeover offers. Sources familiar with the matter told Reuters on Sunday the company chose Thermo Fisher over Sigma-Aldrich, a maker of chemicals for research laboratories, and a private equity consortium consisting of Blackstone Group, Carlyle Group, KKR, and Temasek Holdings.
Analysts have previously said the combination of Waltham, Mass.-based Thermo Fisher and Carlsbad, Calif.-based Life Technologies would create an unparalleled life sciences company and put Thermo on the road to $20 billion in revenues.
Life Technologies is Thermo Fisher's biggest acquisition since the $12.8 billion merger in 2006 of Thermo Electron and Fisher Scientific International that created the world's largest maker of scientific equipment and laboratory instruments.
Life Technologies, which has a market value of $11.6 billion and debt of about $2.4 billion, explored a sale after previous attempts by Chief Executive Gregory Lucier to boost the value of the company's shares and capture more market share from rival Illumina proved unsuccessful.
Illumina had already demonstrated the appeal of gene-sequencing companies that help analyze a person's genetic blueprint to develop personalized medical treatment. Drugmaker Roche Holding had made a $6.8 billion hostile offer for Illumina last year but walked away when the company demanded a higher price.
Life Technologies had also attracted interest from Roche and industrial and health-care conglomerate Danaher, sources previously told Reuters. Yet in the end it was only Thermo Fisher and Sigma-Aldrich that saw enough synergies to pursue a merger.
Thermo Fisher's products range from the most basic scientific equipment, such as test tubes, to advanced mass spectrometry equipment used to determine the chemical structure of molecules. It also sells chemicals, agents and antibodies used in the manufacturing and research of biotech medicine, and has enhanced its portfolio of environmental safety products for testing air and water quality and food safety in recent years.
The Life Technologies deal would boost Thermo Fisher's presence in scientific research, genetic analysis, and applied sciences. Thermo Fisher has been quite acquisitive in recent years, buying Phadia for $3.5 billion in 2011 and Dionex for $2.1 billion in 2010.
Life Technologies had sought a higher price from bidders after receiving committed offers last Tuesday, the people familiar with the matter said. They asked not to be identified because the matter is not yet public.
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The private equity consortium also raised its offer on Friday from $65 to about $67 per share, short of Thermo Fisher's bid, one of the people said.
The price and structure of the offer from Sigma-Aldrich, which has a $9.2 billion market value and has been working with Morgan Stanley on the offer, could not be determined. Morgan Stanley declined to comment.
At 15.2 times projected 12-month earnings, Life Technologies already trades at a premium to its peer group, which averages 13.9 times projected 12-month earnings, according to Thomson Reuters data.
Life Technologies is also the product of the combination of two companies—Invitrogen, a maker of cultures used in the manufacture of biotech medicines, and the genetic testing company Applied Biosystems.