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Life Tech Shares Retreat Despite Report of Acquisition Interest from Private Equity Groups

NEW YORK (GenomeWeb News) – Despite a report that a group of private equity firms were banding together to possibly acquire Life Technologies, shares of the Carlsbad, Calif.-based firm fell today.

On Tuesday afternoon, Bloomberg reported that Blackstone Group, Carlyle Group, TPG Capital, and Temasek Holding had joined to explore an offer for Life Tech. Despite the speculation, shares of Life Tech slipped nearly 3 percent on the Nasdaq to $60.19 in afternoon trading.

Citing unnamed sources, Bloomberg said that the group of private equity firms is in active discussions with banks on financing, and bids for Life Tech are due next month. Additionally, Life Tech Chairman and CEO Greg Lucier is reportedly in favor of a leveraged buyout rather than a strategic sale to a competing firm so that he can remain in charge of the firm.

In January, reports first surfaced that Life Tech was exploring a possible acquisition and had hired investment banks Deutsche Bank Securities and Moelis & Co. to conduct a review and start the process of seeking a potential buyer. The banks reportedly had already approached Blackstone, KKR, TPG, and Carlyle about a leveraged buyout by then.

Life Tech confirmed at the time that it had hired the two banks to "assist in its annual strategic review," but added that its board "has not decided on any specific course of action."

In its Form 10-K filed last week, Life Tech added that "[a]t least on an annual basis, our board of directors reviews and assesses strategic opportunities to increase shareholder value, and the board of directors initiated such a review last summer."

Speculation on potential industry players that may interested in purchasing the company has included Thermo Fisher Scientific, Roche, Danaher, and GE.

A few weeks ago, Reuters reported that a couple of private equity firms made initial offers to Life Tech, but at least one competitor, Thermo Fisher, had stepped away from a possible deal due to a large discrepancy between the price it was willing to pay and the price that Life Tech sought.

Peter Lawson of Mizuho Securities said in a research note today that an acquisition of Life Tech may cost more than $70 per share, an amount which could preempt a leveraged buyout. He added that it may make sense for Life Tech to spin out Ion Torrent in an initial public offering or sell that part of its business.

"We could value Ion Torrent at 4-5x revenues, or about ($1.0 billion to $1.5 billion), which would help bolster the internal rate of return," Lawson said.

Ross Muken of the ISI Group said in a research note last night that the most recent development is "an additional indication that the likelihood of a strategic event is high (we continue to view a leveraged recap as the most likely outcome), as [Life Tech] investors, in our mind, expect some formal outcome from this ongoing process and a return to the historical approach to value creation (or 'value destruction' dependent on your view point) is likely to be viewed as unacceptable.

"Based on this premise, we maintain our probability of a strategic event at ~75 percent," he wrote.

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