Life Technologies, Inc. Review
I’m keeping a close eye on Life Technologies, Inc. (Ticker: LIFE). This is one of my long term holdings as I’ve held this one since its IPO in 1999 at $7.50 per share. The stock is currently trading around $62.74 generating an unrealized gain of ~736% (16.4% annual return since 1999). In any case, private equity and strategic buyers are circling around this company and my bet is that a deal will get done. This company throws off very nice cash flow and its biz is primarily consumable products for life sciences R&D. In another words, it’s a very stable biz. It really is amazing to see this once tiny company in 1999 that was essentially a one product company (selling a cloning kit) to a company that was able to acquire Gibco / Life Technologies and ABI. I don’t want to see this one go, but if the price is right… Anyways, I may add to my position if a deal looks more certain. I expect to see a 7 in the price if a deal was to occur.
Edit: I forgot about the 2 for 1 stock split so my cost basis is actually $7.50 and not $15.00.
posted by Money Turtle @ 12:21 PM
6 comments
6 Comments:
MT,
I am watching this event as well. God bless you for holding since the IPO. You certainly have done very well. Looking at the lifetime stock charts, 2003, 2007 and 2009 were great years (lower left to upper right, chart speak) and 2008 was a nightmare. We are glad you road out the volatility.
Your advantage is you are already holding so you only need to wait for the final announcement. I would not add to your position and raise your dollar cost average. That would be getting greedy.
I like the fact that LIFE recently reached an all time high of $65.84 so any offer should be north of that number. The challenge is what might the magic number be?
Chief Executive Officer Gregory Lucier favors a buyout over a deal with a competitor because he wants to keep the reins. PE guys like that comment but they may not want to pay as much as a strategic would.
I have read some rumbles about an on again, off again, on again, exploring a sale. Do you know what this is change is all about?
Regards,
inforsource7
This company is attractive to both private equity and strategic buyers. The company throws off a good amount of free cash, which private equity wants to see.
The obvious strategic buyer that comes to mind is Thermo Fisher Scientific. I can see lots of synergies / cost cutting that will make this deal nicely accretive for them. My bet is that Life Technologies goes to a strategic buyer.
On a side note: It's interesting to see that Paulson & Co. owns a good amount stock.
MT,
On TMO from what I can tell they have combined cash and treasury stock that would be enough for a $10b+ deal. It would be about 1/3 the size of TMO. On 03-06-13 TMO filed a mixed securities shelf. I dont know exactly what that would be. Would you know?
Yes, Paulson is in and is sitting on a nice profit so far. He is a good holder.
What caused the indecision for LIFE to sell and not to sell earlier in the year?
When the CEO says he would prefer to sell in a buyout, will he hold fast on that comment?
Regards,
inforesource7
MT,
I have to make a correction to my math (too early in the morning, ha ha ha). TMO does not currently have enough combined cash and stock for a $10b+ deal. My calculations show approx. combined $100m. Any mixed securities shelf would have to be substantial if they are preparing to make a bid, unless this is a place holder for any future financing plans. Thoughts?
Are you aware of any recently announced deals in this space that have not closed yet?
Regards,
inforesource7
From what I've read on Bloomberg, Life Technologies initiated a strategic review last fall with the goal of reaching a deal by February. Price floated around was $65 - $75.
Ultimately, the job of the CEO and board of directors is to maximize shareholder value. If a strategic buyer offers a compelling price vs private equity, they got to take the higher price whether the CEO likes it or not.
Thermo Fisher does have a substantial debt load from their most recent deals. I can see a big stock component if they go after Life Technologies. When Thermo went after Fisher Scientific, it was an all stock deal. I know the more recent deals were cash.
FWIW… The DealReporter had a small write up in which they noticed that TMO was scaling back their share buy back this year to ~ $600 million from ~ $1.2 billion the previous year. This may be an indication that they are building cash for an acquisition.
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