Recently, Thermo Fisher Scientific (TMO) completed the previously announced acquisition of Phadia. In May 2011, the company had decided to acquire Phadia for €2.47 billion (approximately $3.5 billion) in cash from European private equity firm Cinven. Phadia, based in Uppsala, Sweden, is a leading player in allergy and autoimmunity diagnostics.
Phadia, founded in 1967, operates through two leading brands — ImmunoCAP for allergy tests and EliA for autoimmunity tests. The company recorded €367 million (approximately $525 million) of revenues in 2010 that represents a 3-year compounded annual growth rate of 10% at constant exchange rates.
Phadia will become part of Thermo Fisher’s Specialty Diagnostics business. The deal is expected to be EPS-accretive for the company by 7 cents in 2011.
Consequently, Thermo Fisher raised its adjusted EPS guidance for the full year to $4.15−$4.25 (previous guidance of $4.08-$4.18), representing a growth of 20−23%. Moreover, the acquisition is expected to contribute $190 million to revenues based on which the guidance was raised to $11.79−$11.89 billion ($11.60-$11.70 billion), representing a 12% growth.
Earlier this month, Thermo Fisher decided to raise $2.1 billion to partly finance the acquisition of Phadia. The company issued notes in two installments – $1 billion of 2.25% senior notes due 2016 (at an issue price of 99.826% of the principal amount) and $1.1 billion of 3.6% senior notes due 2021 (at an issue price of 99.809% of the principal amount).
A strong cash balance helps Thermo Fisher pursue suitable acquisitions or reward its shareholders through share buybacks. The company exited the second quarter with cash and cash equivalents of $1.4 billion compared with $917.1 million at the end of December 2010. The company also spent $225 million to buy back 3.8 million shares during the quarter.
Meanwhile, banking on PPI and PPI-Lean projects and cost control, operating margins revealed an improving trend. However, the company faces tough competition from players such as Life Technologies (LIFE), Illumina (ILMN) among others.
We are currently Neutral on Thermo Fisher.
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