May 19 (Bloomberg) -- Thermo Fisher Scientific Inc., the largest maker of laboratory instruments, rose to a record high in New York trading after agreeing to buy Sweden’s Phadia AB to expand in testing for allergies and autoimmune diseases.
Thermo increased $2.64, or 4.2 percent, to $65.38 at 4 p.m., the shares’ highest value since they began trading on the New York Stock Exchange in 1980. The Waltham, Massachusetts-based company’s stock has gained 18 percent this year.
Thermo’s 2.47 billion-euro ($3.5 billion) cash purchase of Phadia follows its $2.1 billion acquisition of Dionex Corp., a maker of chemical analysis products, in December. The company is bolstering its stable of diagnostics products while moving away from services, and divested two medical-testing businesses last month. Thermo will fund the Phadia deal with about $500 million in cash and the balance with debt, Chief Executive Officer Marc Casper said in a telephone interview today.
“This is a company that’s executing on its plan,” Aaron Vaughn, an analyst at Edward Jones & Co. in St. Louis, said in a telephone interview today. “They said they’re going to use their capital allocation to do M&A. They’re walking the walk right now.”
Thermo is buying Phadia from Cinven Ltd., a London-based private equity firm, and said it expects the deal to be completed in the fourth quarter. Phadia will immediately add to adjusted profit and contribute as much as 30 cents a share next year, Thermo said in a statement.
“It’s a very neat fit,” Peter Lawson, an analyst with Mizuho Securities in New York, said in a telephone interview today. “It fits in with their specialty diagnostic business and it moves them deeper into allergy testing and autoimmune testing.”
There have been 240 acquisitions of medical diagnostics companies announced in the last five years, according to Bloomberg data. The average disclosed size was $110 million, and the average premium was 31 percent, the data show.
Thermo had been named as a potential buyer of Gen-Probe Inc., a maker of diagnostic tests for gonorrhea and human papillomavirus that earlier this month hired Morgan Stanley of New York to find a buyer, according to three people familiar with the matter. Today’s purchase of Phadia makes it unlikely Thermo would pursue Gen-Probe, Edward Jones’s Vaughn said.
“From a balance-sheet perspective, that would stretch Thermo Fisher too much at this point,” Vaughn said. He recommends buying the company’s shares. “I’d be very surprised if they were to pursue Gen-Probe.”
Gen-Probe, based in San Diego, dropped $3.79, or 4.4 percent, to $82.87 in Nasdaq Stock Market composite trading. The shares have gained 42 percent this year.
Cinven bought Uppsala, Sweden-based Phadia in 2007 in a deal valuing the company at 1.29 billion euros. The buyout fund manager said today’s deal gave it a return of more than three times its original investment. Cinven acquired Phadia, formerly Pfizer Inc.’s medical-test unit, from investment firms PPM Capital and Triton Advisers Ltd.
The firm, which is seeking to raise a new 5 billion-euro fund, is aiming to return cash to investors after the financial crisis almost halted private-equity deal-making for two years. Last year, Cinven agreed to buy Sebia SA, a French maker of medical diagnostic equipment, for about 800 million euros from London firm Montagu Private Equity LLP.
Barclays Capital acted as financial adviser and Wilmer Cutler Pickering Hale & Dorr LLP provided legal counsel for Thermo, according to the statement. Goldman, Sachs & Co. was financial adviser to Phadia, and Freshfields Bruckhaus Deringer LLP served as legal counsel.
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