Both companies are important suppliers to clinical laboratories and research labs
In recent days, news surfaced that Thermo Fisher Scientific Inc. (NYSE: TMO) was offering $6 billion to acquire Millipore Corporation (NYSE:MIL). Neither company has confirmed the offer, but yesterday Millipore issued a statement that its Directors were “evaluating strategic options.”
Should Thermo Fisher acquire Millipore, or should Millipore find another buyer, it will mean the same thing: more consolidation among vendors who are major suppliers for clinical pathology laboratories. This would continue a global consolidation trend among clinical laboratory suppliers and in vitro diagnostics (IVD) manufacturers that reaches back more than a decade and a half.
Wall Street reacted immediately to the news, which first surfaced on February 22. Share prices for Thermo Fisher dropped by 3% while share prices for Millipore increased by 22%. Millipore has annual revenues of $1.6 billion, with market cap of around $4 billion as of February 21. Thus, a sales price of $6 billion represents a significant premium for the company.
Headquartered in Billerica, Massachusetts, Millipore may be best known for its water purification and filtration products, used extensively by clinical laboratories and research organizations. It also has a significant business with pharmaceutical companies, contract drug manufacturers, and biotech firms.
Thermo Fisher Scientific is based in Waltham, Massachusetts, and is one of the world’s largest suppliers to clinical laboratories, biotech firms, and research organizations. It sells an extensive catalog of analytical instruments, laboratory equipment, software, consumables, and reagents. It was November 2006 when the merger of Thermo Electron Corporation and Fisher Scientific International Inc., took place.
Reacting to the news of an acquisition offer, most financial analysts saw the deal in a positive light. After pointing out that half of Millipore’s sales are for products used in drug manufacturing—a market where Thermo has relatively little market presence. Dan Leonard, an analyst with First Analysis Securities Corp, stated “For Thermo this would be instant scale in an attractive growth area within the industry, which is biotech drug manufacturing, and it would be instant scale in an area where they are currently undersized.”
Millipore acknowledged that it retained Goldman Sachs and was approaching other buyers. If Millipore turns up another buyer, it is likely to be General Electric (NYSE: GE). “For some time I’ve thought that the two homes for Millipore could be Thermo Fisher and General Electric,” stated Leonard in an interview with a Reuters reporter. “So if they’ve [Millipore] hired Goldman, I imagine Goldman is on the phone with GE right now asking if they are interested.”
By initiating this offer and offering a significant premium over Millipore’s market value, Thermo Fisher has put Millipore “in play.” Millipore’s Board of Directors, by looking for other potential buyers, are taking the necessary steps to see if any other companies are willing to outbid Thermo Fisher. Thus, pathologists and clinical laboratory administrators should expect that Millipore is not likely to remain an independent company once these events come to a conclusion.