Thermo Fisher ($TMO) is plodding along with its blockbuster agreement to trade $13.6 billion for competitor Life Technologies ($LIFE), picking up European Commission approval on the condition that it sheds a few business units.
In order to allay regulators' antitrust concerns, Thermo said it will sell off its cell culture, gene modulation and magnetic beads segments, businesses that hauled in a combined $225 million last year. That amounts to a mere 1.8% of the $12.5 billion Thermo grossed in the same period.
The EU's approval vaults Thermo over its first major regulatory hurdle, and the company still expects to close its buyout early next year. Thermo is still awaiting word from the U.S. Federal Trade Commission, but, based on its conversations with the agency, the company doesn't expect to have to ditch any other units to win stateside approval.
Thermo is now that much closer to wrapping up a deal CEO Marc Casper has said will spur 30% annual revenue growth for his company, taking its "leadership position to a new level, creating an unrivaled leader in our industry." Thermo expects to save about $275 million annually by year three of the merger, and, in the meantime, the company is racking up millions in restructuring costs, cutting 655 jobs in the first half of the year in an effort to pare down.
All the while, Thermo faces a steady hum of concerns that it overpaid for a second-place finisher in the gene sequencing world. In addition to the $13.6 billion sticker price, Thermo is on the line for another $2.2 billion or so to cover Life's outstanding debt, a costly bill for a company that has averaged sales growth of only about 5% over three years. Life trails behind Illumina ($ILMN) in the sequencing space, and despite the success of its Ion Torrent platform, many analysts doubt it can ever surpass its competitor.
Last quarter, Thermo boosted its net revenue 3% to $3.2 billion thanks to a 7% jump in its diagnostics business and a 4% increase in its lab products unit.
- read the announcement