Affymetrix is a California-based company that manufactures DNA microarrays called GeneChip, which are used by researchers to scan a biological sample for the presence of particular genes. Competitors in the microarray field include Illumina (ILMN), Agilent Technologies (A), and GE Healthcare, a subsidiary of General Electric Company (GE).
On January 8, 2016, Thermo Fisher Scientific (TMO) announced the acquisition of Affymetrix for approximately $1.3 billion. The deal is expected to expand the company’s biosciences, genetic analysis, and diagnostic equipment products portfolio. Thermo Fisher is expected to close the deal by the end of fiscal 1Q16 and will pay $14 for a share of Affymetrix in cash, according to the terms of the deal.
Other competitive bids
Origin Technologies, which is owned by former employees of Affymetrix, offered to acquire the company for $17 per share of Affymetrix, topping the Thermo Fisher’s offer by $3. But the Affymetrix management determined that the third-party financing risks and lengthy regulatory procedures entailing the Origin’s offer would outweigh its potential benefits and would not render the deal superior to Thermo Fisher’s offer.
Impact on performance
The acquisition of Affymetrix should strengthen Thermo Fisher’s leadership in genetic analysis and biosciences, expand its product portfolio of flow cytometers, and add complementary product portfolios, creating new market opportunities that should enhance profitability. The deal is expected to be accretive to adjusted EPS (earnings per share).
The acquisition is also expected to improve earnings by $0.10 per share in the first year and to generate cost savings of approximately $70 million by the third year. Investors seeking to gain exposure to Thermo Fisher Scientific can invest in iShares Russell 1000 Value ETF (IWD). IWD has ~0.37% of its total holdings in Thermo Fisher.
In the next part, we’ll look at analyst recommendations for Thermo Fisher.