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Class Action Lawsuit Seeks to Stop Thermo Fisher's $13.6B Buy of Life Tech

NEW YORK (GenomeWeb News) – A Life Technologies shareholder has filed a class action lawsuit against the company and Thermo Fisher Scientific alleging breach of fiduciary duty stemming from the planned $13.6 billion sale of Life Tech to Thermo Fisher.

The lawsuit, which seeks to stop the deal from proceeding, also alleged a conflict of interest by Life Tech management and its board and adds that the transaction, if completed, would unfairly enrich them without benefitting Life Tech's ordinary shareholders.

Chang Choi, a shareholder in the firm, filed the lawsuit individually and as a class action on behalf of Life Tech shareholders. Along with Life Tech, its Chairman and CEO Greg Lucier, the company's board members, and Thermo Fisher are named as defendants.

Under the terms of the deal announced last week and anticipated to close in early 2014, Thermo Fisher would pay Life Tech $76 for each share of its stock. In addition, Thermo Fisher would assume $2.2 billion of Life Tech's net debt.

In the complaint filed last week in Superior Court of the State of California, County of San Diego, Choi claimed the proposed deal "is the product of a hopelessly flawed process that is designed to ensure the sale of Life Technologies to Thermo Fisher on terms preferential to defendants and other Life Technologies insiders and to subvert the interests of plaintiff and other public stockholders of the company."

Choi said that Life Tech's board and management together own nearly 4.5 million shares of the company's stock "and seek liquidity for their large but illiquid holdings" in the company. Upon completion of the deal, Life Tech management and its board would receive more than $340 million from the sale of their illiquid holdings, Choi alleged, "[t]hus board members are conflicted and serving their own financial interests rather than those of Life Technologies' other shareholders."

Additionally, the complaint said that the Carlsbad, Calif.-based company's officers and directors would see a $94.6 million payday when currently unvested stock options, performance units, and restricted shares became fully vested and exercisable upon the closing of the sale. These special payments, Choi said, are not being made to ordinary shareholders.

Moreover, the lawsuit claimed the deal "undervalues the company's prospects." At $76 per share, the offer price is 12 percent above the $68 closing price of Life Tech's shares on April 12, the last trading day before the acquisition was announced. By comparison, during the past five years, Thermo Fisher has announced or made 1,941 deals at an average size of $145.2 million and a typical premium of 53 percent, Choi said.

Life Tech shares had increased 36 percent since the start of 2013 through April 12 and "was likely to continue its growth well beyond the offer price," the lawsuit further said.

In seeking to protect the deal, the defendants implemented measures to preclude any competing bids for Life Tech, thus denying a fair sales process, Choi alleged. These include a no-shop clause that prevents Life Tech from soliciting potential competing bidders. Life Tech also is required to disclose to Thermo Fisher confidential information about any competing bids it may receive, allowing Thermo Fisher to match any bid, and if Life Tech were to terminate its deal with Thermo Fisher, it would have to pay a multimillion dollar penalty, according to the complaint.

"Furthermore, the board failed to insist upon a post-market check to test the reasonableness of the proposed acquisition price," the lawsuit said.

The lawsuit seeks an injunction against the sale of Life Tech to Thermo Fisher. In the event the deal is completed during the course of the lawsuit, it asks the court to rescind the acquisition.

Life Tech said it had no comment on the case.