Some Life Technologies
I added to my Life Technologies (Ticker: LIFE) position today at $65.59. It’s looking likely that Thermo Fisher Scientific (Ticker: TMO) will make a bid for Life Technologies. Looking at the stock movement in Thermo Fisher, the market will be receptive of this acquisition. These two companies complement very well with one another. I would be surprised if Thermo Fisher passed up on this opportunity.
posted by Money Turtle @ 11:50 AM
24 comments
24 Comments:
MT,
From what I read the auction seems to be between two. TMO and Roche/KKR/Hellman. You indicate TMO and LIFE compliment each other well. What about LIFE's genetic sequencing? How does that fit in?
Roche does not want to spend $13B+ so its looks like they have partnered with PE so they can obtain the genetic sequencing business and maybe pay a little extra for it so the group as a whole has a better chance in the bidding. The remaining businesses would go to PE and lower the total cost of the deal. Roche has intensified its focus on combining more of its pharmaceutical pipeline drugs with the development of companion diagnostics. The importance of genetic sequencing for Roche became evident when the drug maker aggressively tried to acquire Illumina, last year.
Does TMO have some history of being left at the bidding alter (Beckmman comes to mind)? I don't know if there have been any other deals.
Regards,
inforesource7
I definitely agree that Roche wants the sequencing biz after failing to acquire Illumina. Some analysts have mentioned that Thermo is not that interested in the sequencing biz, but I disagree. Thermo have been aggressively buying out instrumentation companies left and right. The sequencing biz will generate a nice cash flow based on the consumables used.
I remember Thermo made a run at Gen-Probe, but acquired Phadia instead. Thermo usually get what they want.
MT,
I took advantage of a nice gift on Friday morning when LIFE opened down. I bought some deep in the money calls and my basis is $65.70. I also have some April PUT credit spreads to lower my basis. I will be using additional options to lower my basis even further before the official announcement comes. I cannot compete with your cost basis but at least I should make a nice short term profit. I believe this goes down before by April 30 or sooner. The eluding question is whether its before or after the LIFE earnings report on 04/24/13. If you have any insights on a possible timing of the please share it.
Regards,
inforesource7
MT,
I thought I would check the earnings report release dates for TMO and RHHBY just for kicks. TMO is 04/24/13 (same as LIFE) and RHHBY is 04/30/13. Based on these dates my prediction for official announcement will be refined to: 1) If TMO is the buyer than either 4/15/13 or 4/22/13 which would be before each earnings report date. We favor 4/22/13 if TMO will be using some stock in purchase. If RHHBY & PE are the buyers than 04/22/13 which is before each earnings report date.
Lets see how I do.
Regards,
inforesource7
I don't know if the earnings date will drive the deal date. We should hear some info as bids are due this week. I can see this auction playing out a bit as there are many players involved.
MT,
News this morning on KKR, BLK, Carl, TPG and Temasek consortium rumored to possibly bid approx. $12b (market cap). FYI market cap is lower than total deal value. total deal value is EV. My calculations come up with a price of approx. $70.45 at $12B market cap.
Here is the web link that I believe is the original source of the rumor.
http://www.nypost.com/p/news/business/kkr_others_in_megadeal_uBJMQoVDwRWgIflUBM5zBM?utm_medium=rss&utm_content=Business
Regards,
inforesource7
I saw the headline this morning. I still think Thermo gets Life.
MT,
It will be interesting to see where Roche comes in here. No mention of them in the NY Post article. Maybe they want the consortium to win the bid and have an arrangement to buy the genetic sequencing business. This makes it easier for the consortium to raise their offer price.
Regards,
inforesource7
MT,
Can you recall any past historical EV/EBITDA multiples for other companies in this space? I dont recall you mentioning any in your previous LIFE blog comments.
Do you remember the old YAHOO message board arbs gang like mariyatrader and arb69, etc.? If so, where are they posting now.? The YAHOO message board is so much different now.
Regards,
inforesource7
I can't recall a major acquisition in life sciences that focused on R&D consumables. There's not many companies out there...
Here's some data on some recent acquisition of instrumentation companies in the life sciences:
Thermo bought Dionex at 20X EBITDA (4X Revenue)
Hologic bought Genprobe at 20X EBITDA (6X Revenue)
I don't see Life going out at anything close to those multiples. Most likely in the low double digit EBITDA.
I've seen Mariyatrader over at the HOGS board, but haven't seen arb69.
MT,
Thanks for the multiples. Those were real high although sometimes when a targets total takeout price is only a few billion or less its easier to justify. I think GenProbe was about $3.7B. We do like unique niche companies though like in life sciences.
Get a kick out of the various articles tonight.
The last Reuters article mentioned Roche, Hellman and KKR. This time Roche and Hellman are not mentioned and KKR is joining BLK Carl group. $65 to $70 target price is consistent with the past.
http://www.reuters.com/article/2013/04/09/us-lifetech-bid-idUSBRE93818Q20130409?feedType=RSS&feedName=innovationNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+news%2Fdeals+%28Reuters+Deals+News%29
WSJ blog is just rushing to get a story out there. They are trying to talk down the PE bid to $11b or $62. This number is a joke.
http://blogs.wsj.com/deals/2013/04/09/kkr-blackstone-carlyle-temasek-eyeing-11-bln-life-bid/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fdeals%2Ffeed+%28WSJ.com%3A+Deal+Journal+-+WSJ.com%29
The NY Post indicates KKR joining BLK Carl group. They talked up the was deal value at ($12B). This was a hit piece to get a pop out of the stock price today. They never provided clarity on share price.
Regards,
inforesource7
MT,
Sometimes Reuters has multiple updates after their initial article. I appreciate Reuters thoroughness. It looks like Roche and Danaher had very little interest. You will be correct in projected TMO the winning bidder.
I saw they work on the agreement over the weekend an announce Monday 4/15/13. Check the news early Sunday evening for a deal leak.
http://www.reuters.com/article/2013/04/10/lifetech-bid-idUSL3N0CX0G220130410?feedType=RSS&feedName=industrialsSector&rpc=43
Regards,
inforesource7
News will start leaking out left and right. When I saw that $62 bid from the the PE players in the Journal, I had the same reaction as you. Why even waste people's time with such a low bid. It may be one of those merger Monday's.
MT,
What your experience when an acquirer offers cash and stock for a target and its accepted?
In otherwards watching TMO stock price is the key here post announcement. Will TMO pop and hold will it dip and hold or a mix?
I imagine the TMO stock price is a reflection on what the market thinks of the deal and the acquirere's reasoning.
Regards,
inforesoucre7
I've had positive experiences when the acquirer issues both cash and stock. The most recent one that I was involved in was Express Scripts acquisition of Medco Health.
With Life Technologies, I would actually prefer stock as I can defer my cap gains. Thermo is a very well run company and I can see the stock going higher. Of course, you can always hedge the stock portion.
MT,
Thanks. Bloomberg has a story out a few minuted ago that I could believe. The $66 number could be the PE consortium and comes out $11.246B MCap and $13.394B EV or 11.16x EBITDA. The $69 number could be TMO and comes in at $11.57B MCap and $13.9b EV or 11.59x EBITDA.
http://www.bloomberg.com/news/2013-04-10/life-said-to-draw-bid-from-buyout-group-including-blackstone.html
Regards,
inforesource7
MT,
Given TMO wins the prize would you like to guesstimate what % of cash and % of stock TMO might offer? I believe you mentioned some shelf offering a while back that was most likely setup for this deal.
Regards,
inforesource7
This one I have absolutely no idea. When they acquired Fisher Scientific, it was an all stock deal. Their subsequent deals have been all cash. Looking at the stock price in Thermo and their current debt load, I would have to say that it will be a substantial component of the offer price. Just a wild guess... maybe 60% stock 40% cash?
MT,
TMO is showing $855m in cash and approx. 1m shares in treasury (approx. $79m) so the mixed price shelf is most likely the currency of choice. This could be why the LIFE stock price has held up so well considering the offering prices have been so semi public. If your brokerage accounts allows a good way to track is to add the LIFE and TMO stock prices together. They peaked at $149 on 4/10/11 and currently at $146.80.
Looks like things could be setting up well for you by deferring the tax man on this event.
Regards,
inforesource7
MT,
LIFE ends the day and week on good price action with above average volume. Lets see if all parties are working hard this weekend to reach an agreement and deliver some wonderful news on Monday morning. I don't recall seeing such a good run up in price action prior to a deal being reached. Any kind of major disappointment will be ugly.
Regards,
inforesource7
Someone knows something and the stock is acting positively on that info. It looks like it'll be a merger Monday.
MT,
Deal news leaked. Bloomberg had it first but very little detail. Reuters adds alot more color.
http://www.bloomberg.com/news/2013-04-14/thermo-fisher-said-in-exclusive-talks-to-buy-life-technologies.html
Sleeper Sigma-Aldrich (SIAL) put in a bid. I never read anything about SAIL showing interest. Well they certainly helped push the potential bidding price higher.
http://www.reuters.com/article/2013/04/14/us-lifetechnologies-thermofisher-idUSBRE93D0A620130414?feedType=RSS&feedName=innovationNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+news%2Fdeals+%28Reuters+Deals+News%29
Regards,
inforesource7
Thanks for the late breaking news. I was also surprised to see Sigma Aldrich getting into the mix. Looks like it's just about a done deal with Thermo getting Life.
MT,
The latest news rumor has the deal around $75.00. Wow !!! It looks like CEO Gregory Lucier may have set up LIFE real well to attract such a nice valuation. One example is completing a deal for KDR Biotech during the heat of the auction. Good job Lucier.
http://www.reuters.com/article/2013/04/14/lifetechnologies-thermofisher-idUSL2N0D10E520130414?feedType=RSS&feedName=mergersNews
Regards,
inforesource7
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