Thermo Fisher Scientific Inc. TMO recently agreed to acquire Heysham, U.K.-based research chemical manufacturer, Alfa Aesar, for $405 million (£256 million) in cash. According to Thermo Fisher, this acquisition will help the company expand its existing portfolio of chemicals, solvents and reagents that support laboratory applications including research, drug discovery and development, and production.
Alfa Aesar, which is a part of Johnson Matthey Plc, currently has 480 employees and functions in key research hubs in the U.S., Germany, China, South Korea and India. The company generated sales of approximately $125 million in 2014. The transaction, which is expected to be completed by the end of 2015, is currently subject to customary closing conditions, including regulatory approvals. Alfa Aesar, once acquired, will be integrated into Thermo Fisher’s Laboratory Products and Services Segment.
Thermo Fisher has undertaken multiple acquisitions in the past that have added complimentary technologies, expanded its presence in high-growth markets, and generated cost and revenue synergies thereby creating shareholder value. The Life Technologies takeover, in particular, has led to the emergence of an unrivaled market leader serving research, Specialty Diagnostics and applied markets. As per management at Thermo Fisher, the acquisition supports its three-pronged growth strategy of technological innovation, unique customer value proposition and expansion in emerging markets.
Apart from the Life Technologies buyout, other significant acquisitions include Thermo Fisher’s purchase of Advanced Scientifics for $300 million (to expand on the back of complementary single-use systems and bioprocess equipment); One Lambda (to strengthen foothold in in vitro diagnostics and add new capabilities to the company’s transplant-testing workflow market) and Doe & Ingalls (a channel for specialty production chemicals and provider of customized supply-chain services to life sciences and microelectronics industries).
The company’s several other takeovers include Dionex (that has brought in liquid and ion chromatography); Ahura Scientific (portable optical analysis instruments); Fermentas (molecular and cell biology for genomics) and Finnzymes (PCR reagents and consumables). Similarly, allergy and autoimmunity diagnostics, novel biomarker portfolio and microbiology solutions were inducted in Thermo Fisher’s Specialty Diagnostics business with the respective acquisitions of Phadia, BRAHMS and Trek Diagnostics. Apart from boosting revenue accretion, these deals have historically benefited the company’s operating margin while also resulting in tax synergies. We believe the impending acquisition of Alfa Aesar will deliver similar benefits for the company, going ahead.
The stock currently carries a Zacks Rank #3 (Hold).
Stock to Consider
Some better-ranked medical instrument stocks are Globus Medical, Inc. GMED, Hologic Inc. HOLX and LDR Holding Corporation LDRH. All the three stocks carry a Zacks Rank #2 (Buy).
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