Thermo Fisher Scientific signs definitive agreement to acquire One Lambda

Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today announced that it has signed a definitive agreement to acquire One Lambda, the leader in transplant diagnostics, for $925 million in cash, subject to a post-closing adjustment. The purchase price includes the cost of a three-year retention program established by One Lambda for the benefit of key employees, amounts payable to certain shareholders for noncompetition agreements, and a one-year earn-out provision based on the achievement of certain financial targets. The transaction, which is expected to be completed in the fourth quarter of 2012, is expected to be immediately accretive upon close and add $0.09 to $0.11 to Thermo Fisher's 2013 adjusted earnings per share (EPS).

Founded in 1984 by Dr. Paul Terasaki, a pre-eminent researcher in the field of transplantation, One Lambda is a pioneer in transplant diagnostics. One Lambda's diagnostic tests are used by transplant centers for tissue typing, primarily to determine the compatibility of donors and recipients pre-transplant, and to detect the presence of antibodies that can lead to transplant rejection. One Lambda is privately held and has approximately 320 employees, primarily based in Canoga Park, Calif., who serve more than 1,400 laboratories worldwide. The business, which generated revenue of $182 million in 2011, will become part of Thermo Fisher's Specialty Diagnostics Segment.

"One Lambda is an exciting addition to our specialty diagnostics portfolio," said Marc N. Casper, president and chief executive officer of Thermo Fisher. "The One Lambda team has pioneered market-leading tests that are widely used across the transplant-testing workflow to improve patient outcomes. With its strong technology platform, high margin profile and good growth prospects, the business is perfectly aligned with our specialty in vitro diagnostics strategy.

"One Lambda gives us access to the attractive transplant diagnostics market and complements our existing immunosuppressant monitoring assays. It also offers the opportunity to leverage our global commercial infrastructure to serve growing transplant needs in emerging markets. From a financial perspective, we expect One Lambda to be immediately accretive to our adjusted EPS and to yield a strong return on invested capital."

George M. Ayoub, co-founder, president and chief executive officer of One Lambda, said, "We are excited about the opportunities ahead as we join Thermo Fisher's specialty diagnostics business. I believe that, together, we will increase the use of human leukocyte antigen (HLA) typing and antibody detection to accelerate growth and improve the success rate of transplantation. Importantly, we will continue to fulfill our mission, which is to improve the quality of life for transplant patients and their families."

Casper added, "We look forward to welcoming the One Lambda team to the Thermo Fisher family. We are also pleased to announce that we will collaborate with Dr. Terasaki and the Terasaki Foundation Laboratory, which continues to support groundbreaking research in preventing post-transplant rejection."

Benefits of the Transaction

  • Enhances Thermo Fisher's Presence in Specialty in vitro Diagnostics: Growth in the transplant diagnostics market is being driven by increasing global demand for transplant procedures and post-transplant patient monitoring. This specialized technology supports a broad portfolio of high-margin reagents in the two major categories of transplant testing: HLA typing and antibody detection.
  • Adds New Capabilities to Complete the Transplant-Testing Workflow: One Lambda's leading diagnostic tests for HLA typing and antibody detection pre- and post-transplant will complement Thermo Fisher's existing immunosuppressant assays that are used for monitoring drug therapies in post-transplant patients to prevent transplant rejection.
  • Creates Opportunities to Leverage Thermo Fisher's Commercial Infrastructure in Emerging Markets: Thermo Fisher expects to leverage its extensive commercial capabilities in emerging markets to accelerate growth in One Lambda's existing product portfolio, which is currently marketed primarily to physicians and laboratories in the U.S.
  • Offers Compelling Financial Benefits: The transaction is expected to be immediately accretive to Thermo Fisher's adjusted EPS upon close, and accretive by $0.09 to $0.11 per share in 2013. It is also expected to generate revenue and cost synergies for a total adjusted operating income1 benefit of approximately $15 million in 2015. In addition, the transaction will result in greater tax efficiencies by leveraging Thermo Fisher's global structure.

    Thermo Fisher and One Lambda expect to make an election under section 338(h)(10) of the Internal Revenue Code that will increase Thermo Fisher's tax basis in the acquired assets. This election will result in annual cash tax savings of approximately $19 million over 15 years, yielding a net present value benefit of approximately $190 million for Thermo Fisher.

    The implied 2011 EBITDA purchase price multiple for One Lambda is approximately 10.9x. Including the tax benefit, the implied 2011 EBITDA purchase multiple is approximately 8.7x.

Financing and Approvals

Thermo Fisher intends to fund the transaction through a combination of cash on hand and new debt financing. The transaction, which is expected to be completed in the fourth quarter of 2012, is subject to the satisfaction of customary closing conditions, including applicable regulatory approvals.

Advisors

J.P. Morgan Securities LLC is acting as financial advisor to Thermo Fisher, and Wilmer Cutler Pickering Hale and Dorr LLP is serving as legal counsel. Perella Weinberg Partners is acting as financial advisor to One Lambda, and Sheppard, Mullin, Richter & Hampton LLP is serving as legal counsel.

Additional Stock Buyback Authorized

Thermo Fisher also announced that its board of directors has authorized the repurchase of an additional $500 million of shares of its own common stock in the open market or in negotiated transactions. The new repurchase authorization will remain in effect through December 31, 2012. As of June 30, 2012, the company had $250 million remaining under its existing share repurchase authorization, which expires November 9, 2012.

Casper concluded, "The acquisition of One Lambda, along with our new stock buyback authorization, demonstrates our ongoing commitment to effectively deploying our capital to create shareholder value."

Source:

Thermo Fisher Scientific Inc.

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