Thermo Fisher's $15bn war chest set to further consolidate industry

21-May-2015 - Last updated on 11-Dec-2023 at 12:20 GMT

Thermo Fisher has $15bn of disposable capital, with $10bn set on M&A in the life sciences sector

Danaher's acquisition of Pall will not change the competitive landscape in the bioprocessing tech industry says Thermo Fisher, as it earmarks $10bn for further M&A activity.

Last week, Danaher announced it was buying the filtration, separation and purification technology firm Pall Corporation for $13.8bn (€12bn) in the latest example of consolidation in the life sciences tools industry.

There was some speculation Thermo Fisher had also bid for Pall, but at an analyst day this week management did not say if this was the case but rather confirmed the firm's position in the sector had not changed.

“We play in two fields: cell culture and single-use and we’re the leader in both,” Mark Stevenson, Executive VP and President of Life Sciences Solutions said.

“The things that happened last week in our industry don’t change our competitive position whatsoever. We have a great business with a great future.”

Areas around chromatography and filtration are not currently a large focus for the company, he said - something which would likely have changed if Thermo Fisher had seen success with Pall.

However, the whole management team was confident Thermo Fisher would drive further consolidation in the industry with more acquisitions like the recent $300m addition of single-use systems producer Advanced Scientifics Inc. (ASI) complementing the company's core strengths.

$15bn war chest

In the past decade the firm has completed two very large transactions – the $11bn merger of Thermo Electron with Fisher Scientific in 2006, and last year’s $13.6bn Life Technologies deal – CEO Marc Casper reminded analysts, and for now the company has $15bn of deployment capital at its disposal.

“We’ll put $10bn on the M&A landscape picking up the fragmented players and should there be more opportunities to put leverage up higher for short periods of time we’ll capitalise on that as well,” he said, adding that while a consolidated industry becomes means almost all potential deals would be bolt-ons, if there are more "upscale opportunities...you’ll see us play."

“Our focus is continue to run what we have in a first class fashion and when the right transactions enter our space we will pursue them.”

Evercore ISI analyst Ross Muken said he believed Thermo Fisher will be leveraging this “so long as a sizeable asset offered an attractive long-term return and was highly strategic,” while Jefferies analyst Brandon Couillard noted the company may have a competitive advantage over the next couple of years:

Thermo Fisher “should enjoy a benign competitive bidding environment at least thru 2016 with the two other major consolidators – Danaher and Merck KGaA - on the sidelines digesting recent deals [Pall and Sigma-Aldrich, respectively],” Couillard said.