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TMO’s Acquisition from EPTEK Technology Could Boost Its China Opportunity

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Overview

On December 4, 2017, Thermo Fisher Scientific (TMO) completed the acquisition of some assets from EPTEK Technology and related entities that have offices in mainland China and Taiwan. No disclosure was made regarding the terms of the deal.

The acquired technologies would form part of the Analytical Instruments segment of Thermo Fisher Scientific. Analytical Instruments generates sales of ~20.0% of the total revenues of the company. The chart below shows the sales contribution of each segment.

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The VOC (volatile organic compound) CEMS (continuous emission monitoring systems) is one of the acquired assets. It is used to analyze and measure air quality across varied industrial applications. Thermo Fisher Scientific offers a range of environmental and air quality monitoring solutions that detect a variety of pollutants.

China opportunity

The chart above shows Thermo Fisher Scientific’s scale and depth capabilities in China. The company has established a strong sales force and supply chain capabilities in China. Moreover, the company’s localization strategy in the country has accelerated its growth in the region.

With TMO’s strong commercial capabilities and robust growth strategy, the company is growing at a fast pace in China. With the acquisition of the EPTEK Technology assets, TMO is expected to expand its environmental monitoring capabilities.

According to Thermo Fisher Scientific, “VOC CEMS is an expanding market opportunity in China, as customers need advanced monitoring instrumentation and software to help them comply with new and rapidly evolving environmental standards.”

For industry-focused exposure to Thermo Fisher Scientific, investors can consider the iShares US Medical Devices ETF (IHI), which holds ~7.5% of its portfolio in TMO. TMO’s peers Medtronic (MDT), Abbott Laboratories (ABT), and Stryker (SYK) make up 9.7%, 9.1%, and 5.5%, respectively, of IHI’s total portfolio.

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