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Thermo Fisher Extends Binge With $5.2 Billion Patheon Deal

May 15, 2017
The deals add to the $22 billion in acquisitions announced by Thermo Fisher over the past five years.

Thermo Fisher Scientific Inc. (IW 500/65) agreed to buy Dutch drug-ingredients maker Patheon NV for $5.2 billion, extending the acquisition binge that helped turn it into one of the world’s biggest manufacturers of diagnostic and testing equipment.

Thermo Fisher will pay $35 a share in cash, 35% above Patheon’s closing price Friday, before Bloomberg News reported that the companies were in talks.

The deals add to the $22 billion in acquisitions announced by Thermo Fisher over the past five years, according to data compiled by Bloomberg. Patheon will bring not just any medicine ingredients, but the more complex and harder to produce type grown out of living cells. Such biological therapies are increasingly important to drugmakers facing intense competitive pressure, and companies that have pioneered the therapies are now turning to contractors like Patheon to manage costs or make production more efficient.

“This is a large and high-growth market that opens up new opportunities for us,” Thermo Fisher Chief Executive Officer Marc Casper said on a conference call Monday.

Patheon’s stock jumped to $34.73 before the U.S. markets opened on Monday. Through Friday, the shares had risen 24% since they were sold in an initial public offering in July at $21 each on the New York Stock Exchange. Thermo Fisher’s deal offers a quick post-IPO exit for buyout firm JLL Partners and Dutch vitamin company Royal DSM NV, Patheon’s two biggest shareholders.

Under CEO Casper, the shares of Thermo Fisher have more than tripled in the past five years, outperforming both the Standard & Poor’s 500 Index and peers. The Waltham, Mass.-based company, with a market value of more than $67 billion, now offers equipment, instruments and supplies to laboratories and medical research facilities and is a major player in technology used to sequence the human genome.

Including debt, the price comes to about $7.2 billion, Thermo Fisher said in a statement Monday. Thermo Fisher got committed debt financing from Goldman Sachs Group Inc. for the deal, and expects to finance the purchase with debt of approximately $5.2 billion and equity of $2 billion. The transaction, expected to close by the end of the year, will boost Thermo Fisher’s earnings per share immediately, according to the statement.

M&A Spree

Among its 2016 deals were Thermo Fisher’s $4 billion purchase of testing and technology services provider buying electron microscope maker FEI Co. and the acquisition of Affymetrix Inc., which added technology used by researchers to study specimens at the cellular and genetic level. Thermo Fisher also bought DNA sequencer Life Technologies Corp. for more than $15 billion in 2014.

Patheon was formed in March 2014 through a merger of Canadian drugmaker Patheon Inc. and DSM’s pharmaceutical business. Patheon is incorporated in the Netherlands, with U.S. headquarters in Durham, N.C., and a total of 26 office locations serving clients in about 70 countries, according to its website.

By Ed Hammond, Manuel Baigorri and Aaron Kirchfeld

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