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UPDATE: Thermo Fisher Buying Chromatography Firm Dionex for $2.1B

This article has been updated to include comments from Thermo Fisher officials and additional information.

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Thermo Fisher Scientific today announced that it will acquire chromatography technologies firm Dionex for approximately $2.1 billion.

Under the terms of the deal, expected to be completed in the first quarter of 2011, Thermo Fisher will pay $118.50 per share in cash, representing a 21 percent premium to Dionex's closing share price of $98.17 on Dec. 10, the last trading day prior to today's announcement. The $118.50 per share is a 32 percent premium to the Sunnyvale, Calif.-based company's average closing stock price over the last 60 days.

The purchase is expected to realize total operating synergies of $60 million by the third year, Thermo Fisher said, including $40 million from cost-related synergies and $20 million from adjusted operating income from revenue-related synergies.

In the first year after the close of the deal, the company anticipates $15 million in synergies, Pete Wilver, Thermo Fisher's chief financial officer, said during a conference call.

The deal is expected to be accretive to its adjusted earnings per share by $0.13 to $0.15 in the first 12 months after its close, the company said.

Dionex's chromatography platforms are used mostly in the applied markets, though some have life science applications as well. Founded in 1975, the company shortly afterward introduced the first ion chromatography system for water analysis. It employs more than 1,600 people worldwide.

The firm will be integrated into Thermo Fisher's Analytical Technologies segment.

Thermo Fisher President and CEO Marc Casper said in a statement that Dionex's strength in chromatography complements his firm's suite of mass spectrometers and laboratory information management systems.

Thermo Fisher, based in Waltham, Mass., has shown an interest in expanding its chromatography business for several years, going back to when Marijn Dekkers was CEO of the firm, and purchases in the space include its acquisitions of Cohesive Techologies in December 2006 and Flux Instruments as part of its purchase of the Swiss Analytic Group in January 2007. In addition, earlier this year, Thermo Fisher acquired Proxeon.

The purchase of Dionex would put Thermo Fisher in line to compete with two other firms that offer strong chromatography systems along with their mass spec platforms, Waters and Agilent Technologies. Those two companies are recognized as the market leaders in the chromatography space, in particular, liquid chromatography.

Earlier this year, another major mass spec player, AB Sciex, also entered the chromatography space by acquiring the liquid chromatography business of Eksigent.

The Dionex buy would be Thermo Fisher's biggest acquisition in the chromatography space. According to Casper, there is "very, very little overlap" between the two companies' chromatography offerings. Thermo Fisher said the purchase brings together two complementary chromatography portfolios — Dionex's ion and liquid chromatography systems and consumables, and Thermo Fisher's gas chromatography systems and consumables — "to create the most extensive chromatography instruments, software and consumables offering in the industry."

During the conference call, Thermo Fisher officials noted that only about half of the company's mass specs come with one of its own chromatographs with the balance using chromatographs from other companies, including Dionex. The proposed sale would increase that figure.

Casper said during the call that his firm "will be able to expand the mass spectrometry offering by tapping" into Dionex's customer base.

He also noted that the purchase complements Thermo Fisher's presence in China, where the company continues to build a commercial infrastructure to meet demand in water quality, consumer safety, and life science markets.

According to Thermo Fisher, 35 percent of Dionex's revenues are generated in Asia-Pacific and other emerging high-growth revenues, in line with Thermo Fisher's investment strategy targeting countries such as China, India, and Brazil.

During its fiscal-year 2010 ended June 30, Dionex posted revenues of $419.6 million, up 9 percent from $385 million in fiscal 2009. The company had a profit in fiscal 2010 of $60.4 million, or $3.28 per share, up 8 percent from $56.1 million, or $3.04 per share, in fiscal 2009.

In its first quarter of fiscal 2011, revenues rose more than 13 percent to $102.9 million from $90.7 million in the year-ago period. Profits for the quarter rose 7 percent to $11.3 million, or $0.62 per share, from $10.6 million, or $0.57 per share, a year ago.

In addition to expanding its chromatography business, the deal would create "the most comprehensive desktop and enterprise software capabilities in the industry," by combing Dionex's chromatography data system with Thermo Fisher's laboratory management systems, Thermo Fisher said. It will also benefit from Dionex's presence in the applied markets, the company added.

Thermo Fisher will use cash on hand and committed financing from its financial advisors on the deal, Barclays Capital and J.P. Morgan, to pay for the transaction. Goldman Sachs was the financial advisor to Dionex.

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