10,000 New Colleagues
Thermo Fisher’s Casper has trumpeted the benefit of a larger workforce. “We look forward to welcoming 10,000 new colleagues to our team,” he said.
But as he noted in the conference call, and as both companies noted in their initial press release, Thermo-Life Tech seeks to cut $250 million in costs by combining global infrastructure, starting with $85 million in the first year after the deal, set to close early in 2014.
Inevitably, that spells reductions to the combined workforce of 50,000, through layoffs or attrition. Last year, Thermo Fisher cut 1,120 jobs, carrying out an ongoing consolidation following 12 company acquisitions and two divestitures between 2010 and 2012.
In a research note, Cowen & Co. analyst Shaun Rodriguez, Ph.D., said efforts by Thermo to find a buyer for Life Tech’s next-generation Ion Torrent sequencers may have ended the sales process, though it’s too soon to know what Thermo may sell off.
“If [Thermo] holds onto Ion, history suggests that [Thermo] will apply much more operational discipline,” Dr. Rodriguez said. That would pose a competitive challenge for sequencing leader Illumina, since Ion Torrent has driven recent growth for Life Tech.
Lucier has said Life Tech will have programs designed to retain employees between the April 15 signing and the deal close “so that we can deliver a terrific, well-functioning organization to Marc and his team.” But he cannot assure Life Tech staffers their jobs will survive inevitable Thermo Fisher cost-cutting, with one exception: According to the press release announcing the deal, “it is expected” that Life Tech president and COO Mark P. Stevenson “will have a significant leadership role in the combined company.”
Casper and Lucier insist the acquisition will make winners out of shareholders, and fast—adding $0.90 to $1 to Thermo Fisher’s adjusted earnings per share, which finished 2012 at a record $4.94, 19% above 2011. Thermo has projected an EPS range this year of between $5.32 and $5.46, 8% to 11% over 2012, not counting any future acquisitions or divestitures.
Not all shareholders share Casper and Lucier’s enthusiasm, however. As of May 15, eight shareholder lawsuits had been filed seeking to stop the deal: four in California, home state of Carlsbad-based Life Tech; the rest in Delaware.
The shareholders, all seeking class-action status, fault Life Tech for not seeking more than the 12% premium of the deal’s $76-a-share price, about 12% above Life Tech’s April 12 closing price of $68 per share. Not acknowledged in the suits is that the 12% is on top of a 25% jump in share prices since January, when Life Tech acknowledged hiring consultants for a strategic review. But as plaintiffs noted, the typical premium of 1,941 biotech acquisitions tracked by Bloomberg over the past five years was 53%.