Introduction
Thermo Fisher Scientific Inc. has agreed to buy QIAGEN N.V. for $11.5 billion in what is to be the largest transaction in the healthcare industry this year. This offer, which was announced on March 3rd comes after multiple failed attempts at acquiring Qiagen: Thermo Fisher had already made an offer in late 2019 which had been rejected then.
Companies’ Overview
Thermo Fisher
Thermo Fisher Scientific Inc. is a US-based provider of laboratory equipment, reagents, and medical software and services. It was created with the 2006 merger of Thermo Electron and Fisher Scientific: and now boasts revenues of over $24 billion (2018). It has an extensive history in M&A, with many acquisitions over the past decade to bolster its technological and research efforts, some of which are: Life Technologies Corp. in 2018 for $13.6 billion, Patheon for $7.2 billion in 2017 and Affymetrix for $1.3 billion in 2016.
Qiagen
QIAGEN N.V. is a Netherlands-based holding company providing molecular testing technology for academic and pharmaceutical research worldwide. It is best known for its assay (assessment of the functions of a target entity, e.g. a drug, biochemical substance or organic sample) technologies, which have been greatly used in order to test DNA. However, Qiagen has also recently become one of the leaders for the manufacturing of Coronavirus testing kits: with its new “QIAstat-Dx SARS-CoV-2” that is now being shipped all across the globe.
Industry Outlook
The healthcare sector has ultimately been affected differently from the Covid-19 crisis. Instead of activity slowing down, it has dramatically increased as pharmaceutical and healthcare companies across the globe are working around the clock in finding a cure. This sanitary crisis has also accelerated the pace at which the healthcare industry is evolving: virtual care technologies have seen an important use during times of social distancing, medical diagnostics have been redesigned to be as cheap and as efficient as possible in order to be mass produced, and R&D is now being funded with increased governmental aid. The healthcare companies that will survive this recession are the ones that will focus their efforts on innovating: both in their business model and in their use of technology.
Deal Drivers
This acquisition will allow Thermo Fisher’s already strong diagnostics capabilities (such as in allergy, autoimmunity and oncology) to be consolidated thanks to the addition of QIAGEN’s expertise in molecular diagnostics in order to create more efficient testing technologies, at a faster rate. With an expanded product portfolio, Thermo Fisher Scientific will also be able to expand its geographic reach and use its customer channels to increase access to QIAGEN products worldwide. Finally, given the current Covid-19 situation this merger will greatly advance the effort in fighting the pandemic: both companies have received emergency use authorization from the FDA for their Coronavirus tests and their joint expertise will be crucial in elaborating large scale testing for the virus.
Deal Structure
The transaction is expected to generate synergies of $200 million by year three: $150 million of cost synergies and $50 million of revenue synergies. This number will probably be much higher given how the most important sales in these next few quarters will consist of products related to the Covid-19 pandemic, and the demand for said products will inevitably increase.
The $11.5 billion acquisition, which is expected to be finalized in 2021, is the result of an offer of $39 per Qiagen share in cash (23% higher than the closing price of QIAGEN’s common stock on the Frankfurt Stock Exchange on March 2, 2020) and the assumption of $1.4 billion of net debt. The funding is expected to come from cash as well as the issuance of new debt.
J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are serving as financial advisors to Thermo Fisher while Goldman Sachs International and Barclays Bank PLC are serving as financial advisors for QIAGEN.
Sources and References: Companies website, Deloitte Report, McKinsey Report
To contact the author:
Alberto Dominioni: alberto.dominioni@studbocconi.it
Bocconi Students M&A Circle 