Thermo Fisher Scientific to Acquire Microscopy Specialist for $4.2B

And the blockbuster deals continue. In this month’s epic merger, Thermo Fisher Scientific Inc. is buying FEI Company, a provider of high-performance electron microscopy, for $4.2 billion in cash.
 
FEI designs, manufactures and supports high-performance electron microscopy workflows that provide images and information at micro-, nano- and picometer scales. Through its offering, FEI enables customers across life sciences and materials science markets to make breakthrough discoveries and increase productivity. Based in Hillsboro, Ore., FEI has more than 3,000 employees worldwide and maintains research and development, sales, and manufacturing operations primarily in Europe and the United States. The business, which garnered 2015 revenues of $930 million, will become part of Thermo Fisher’s Analytical Instruments Segment.
 
“The addition of FEI’s electron microscopy platform is a strategic fit with our company and will create significant value for our customers and our shareholders,” said Marc N. Casper, president and CEO of Thermo Fisher Scientific. “In life sciences, there is growing adoption of electron microscopy to study the structure of proteins. The technologies we gain with FEI will complement our mass spectrometry leadership, putting Thermo Fisher in the best position to capitalize on this important trend. We will also be able to leverage our global scale and commercial reach to extend the use of FEI’s products within our biopharma customer base. Finally, the transaction will be immediately accretive to our earnings and will create value for our shareholders through cost and revenue synergies.”
 
Benefits of the Transaction

• Electron Microscopy Platform Complements Mass Spectrometry Leadership to Accelerate Advancements in Structural Biology. FEI’s high-end electron microscopes (EM) are complementary to Thermo Fisher’s mass spectrometry systems used for protein identification and characterization. FEI’s Cryo-EM technology, for example, is a disruptive technique used increasingly for the analysis of proteins in structural biology. With its global scale and commercial reach, Thermo Fisher also has the opportunity to drive the adoption of FEI’s technologies among its life sciences customers, particularly in biopharma.
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• Creates New Opportunities to Expand Presence in Attractive Materials Science Market. FEI brings unique imaging technologies that improve quality and productivity, and expand Thermo Fisher’s capabilities in materials science. Its 3D nano-characterization and nano-prototyping technologies, for example, are critical tools that support the growing trend toward development of devices that are increasingly smaller and more complex to manufacture. Thermo Fisher will benefit from FEI’s strong presence in the semiconductor market, creating a new growth opportunity within this customer set.
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• Proprietary, Global Services Business Generates High-Margin, Recurring Revenue Stream. FEI brings a services business supported by more than 800 employees in over 20 countries, enabling customers to achieve maximum productivity from their instruments. The services business drives high-margin, recurring revenues that represent approximately 25 percent of total FEI sales, and will contribute to Thermo Fisher’s growing services capabilities.
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• Delivers Attractive Financial Benefits. The transaction is expected to be accretive to Thermo Fisher’s adjusted EPS1 by 30 cents in the first full year after close. Thermo Fisher expects to realize total synergies of approximately $80 million by year three following the close, consisting of approximately $55 million of cost synergies and approximately $25 million of adjusted operating income1 benefit from revenue-related synergies.
   

“We are pleased to reach this agreement with Thermo Fisher, which offers a number of important benefits to FEI shareholders, customers and employees,” said Don Kania, president and CEO of FEI. “Our shareholders will see substantial and immediate value through the terms of this transaction. Our customers will benefit from the shared commitment Thermo Fisher and FEI have to innovation and customer service. And our employees will see new opportunities as our development and market expansion plans accelerate by being part of Thermo Fisher. Fundamentally, this transaction bolsters our position in the marketplace and allows us to play an increasing role in enabling our customers to accelerate breakthrough discoveries, increase productivity, and provide solutions to global challenges.”
 
The transaction, which is expected to be completed by early 2017, is subject to the approval of FEI shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. Thermo Fisher intends to use proceeds from committed debt financing and cash on hand to fund the transaction.
 
JP Morgan is acting as financial advisor to Thermo Fisher, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel. Goldman, Sachs & Co. is acting as financial advisor to FEI, and Wilson Sonsini Goodrich & Rosati is serving as legal counsel.
 
“We are very excited to welcome our new colleagues from FEI to the Thermo Fisher team and look forward to realizing the significant benefits of the transaction for all our key stakeholders. FEI’s commitment to R&D, strong IP foundation, and excellent services and software offerings are a great fit with our Analytical Instruments business and will create exciting new opportunities to drive growth,” Casper said.
 
Thermo Fisher Scientific Inc. helps customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. The company reported revenues of $17 billion last year and employs more than 50,000 people in 50 countries. The company is based in Waltham, Mass.
 
FEI Company designs, manufactures and supports a broad range of high-performance microscopy workflow solutions that provide images and answers at the micro-, nano- and picometer scales.