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Life Technologies' Stock Jumps on Reports of Potential Leveraged Buyout or Sale

NEW YORK (GenomeWeb News) – Shares of Life Technologies jumped 17 percent in Friday morning pre-market trading on reports that the firm may be seeking to sell itself.

A report in Canada's Financial Post suggests that Life Tech is seeking a buyer either through a leveraged buyout involving private equity firms or through the sale to another industry player. The Post said speculation is that the firms Life Tech has hired to conduct a review and begin the process, Deutsche Bank Securities and Moelis & Co., have approached four private equity firms —Blackstone, KKR, TPG Global, and Carlyle investment Management.

Life Tech's board of directors issued a statement this morning confirming it had hired Deutsche Bank and Moelis but said that they were retained to "assist in its annual strategic review." The firm added, "The board of directors has not decided on any specific course of action."

Life Tech officials declined to comment further on the news report.

Life Tech has a market cap of around $9.5 billion. Its stock closed yesterday at $54.97 on the Nasdaq. While speculation has pegged a potential LBO price at $65-$75 per share, Jefferies analyst Jon Wood said a note this morning that "the $50 to $60 range is more realistic in present market conditions."

"We see several potential acquirers for Life, with Roche, Thermo Fisher and potentially GE all making strategic sense," Piper Jaffray analyst William Quirk said in a note. "However, given slow growth research consumables dominate Life's product portfolio (~43 percent of revenue), we believe an acquirer interested in the faster growing next-gen sequencing business has better options."

Among the other potential acquirers named in the Financial Post article are Novartis, Honeywell, and Danaher.

ISI analyst Ross Muken said that he sees the chance of a leveraged buyout occurring as "highly unlikely. When considering the current reasonably high debt load and the certain interest from some strategic purchasers we believe consummating a transaction would be challenging."

Muken said that the statement issued by Life Tech's board suggests "it is not yet likely a full blown formal strategic alternatives process. Had this been a formal process we believe they would have cited it as such and in turn we read this to mean a near-term event is less likely."

Further, Muken said that he believes the probability of a strategic sale of the business is around 40 percent with fair value in line with the $65-$75 range. However, he added that he believes a shakeup in the management of Life Tech "accompanied by either a restructuring or recapitalization as the highest probability outcome."

"We could see [Life Tech] potentially split into two — the LBO firm takes LIFE's legacy, cash flow rich business, and a strategic buyer takes a next-gen, sequencing or the molecular medicine/diagnostic business — for example Roche takes Ion Torrent or a broader sequencing asset," Mizuho Securities analyst Peter Lawson speculated in a note this morning. "Another potential pure-play NGS asset in play could pressure shares of [Illumina]."

Life Tech's shares pulled back from their pre-market highs but were up 12 percent at $61.40 in mid-morning trade.