Thermo Fisher Lets Go Of Businesses To Gain EC Approval Of Acquisition
Espicom View: This approval brings Thermo Fisher Scientific one step closer to completing its acquisition of Life Technologies. The businesses that the company has had to let go will barely make a dent in revenues, and the addition of Life Technologies portfolio will add to Thermo Fisher Scientific's market presence. The next step for the company is to gain Federal Trade Commission clearance, which is likely to occur in the near future. Once the acquisition is complete, Thermo Fisher Scientific will be a formidable competitor in the in vitro diagnostic market.
Thermo Fisher Scientific has received approval from the EC for its pending acquisition of Life Technologies, which is valued at approximately US$13bn. The EC expressed its concerns in a statement, as the two companies activities overlap in the supply of laboratory instruments and consumables. The clearance is conditional on divestments of Thermo Fisher's businesses producing and supplying: (i) media and sera for cell culture; (ii) gene silencing products; and (iii) polymer-based magnetic beads. In these areas, the merger would have significantly reduced competition.
For cell culture media markets, the EC's concerns were based on the large combined market shares of the merged entity and the presence of important barriers to entry. For cell culture sera markets, the investigation revealed that the merged entity would occupy a too strong position as compared with its competitors, especially for the supply of sera from the safest and therefore most expensive origins, Australia and New Zealand. In addition, there are high barriers to entry and a limited availability of the required material (blood).
In regard to gene silencing products, concerns stemmed from the strong position the merged entity would have with respect to small interfering RNA (siRNA) and microRNA (miRNA) reagents, the limited number of remaining significant competitors and the barriers to entry resulting in particular from existing patents.
The investigation on magnetic beads showed that the merged entity would have a strong position worldwide in the supply of polymer-based magnetic beads to OEMs, which use magnetic beads in their downstream instruments and kits. Concerns stemmed from the limited number of remaining competitors after the merger, from high barriers to entry linked to the presence of intellectual property rights, technical know-how and established commercial relationships, as well as from the closeness of competition of Life Technologies' and Thermo Fisher's products.
To expedite the approval, Thermo Fisher has committed to divest its cell culture (sera and media), gene modulation and magnetic beads businesses:
its HyClone business regarding media and sera for cell culture (excluding single use technologies, where the parties' activities do not overlap);
its gene modulation business (including gene silencing) in Lafayette, CO, US, including the Dharmacon and Open Biosystems brands, equipment, staff and its licence regarding the Tuschl patents; and
its polymer-based magnetic beads business (including the Sera-Mag brand and all other relevant IPRs, customer contracts, personnel and the necessary production equipment). In addition, Thermo Fisher would commit to a two-year transitional agreement to supply magnetic beads to the purchaser.
Combined, these businesses had FY2012 revenues of approximately US$225mn, which represented roughly 1.8% of Thermo Fisher's total revenue for that year. Thermo Fisher's revenue for FY12 reached US$12,509.9mn.
The acquisition remains subject to additional regulatory approvals, including the US Federal Trade Commission (FTC). Based on its discussions with the FTC, Thermo Fisher does not believe any additional divestures will be required in order to receive US approval. The company is working with the regulatory agencies to complete the transaction as soon as possible, and still expects to close in early 2014.