Is Thermo Fisher Overpaying for Affymetrix?

By Chris Lange Updated Jan 13, 3:12PM EST · Published Jan 11, 9:05AM EST

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Is Thermo Fisher Overpaying for Affymetrix? — © Thinkstock

Affymetrix Inc. (NASDAQ: AFFX) was absolutely soaring early on Monday on word that it will be acquired. Thermo Fisher Scientific Inc. (NYSE: TMO) is making the acquisition, to the tune of roughly $1.3 billion, or $14.00 per share. Both boards of directors unanimously approved the transaction, but it is still subject to the approval of Affymetrix shareholders and regulators.

The transaction is expected to be completed in the second quarter of 2016.

Affymetrix has roughly 1,100 employees worldwide and maintains sales and distribution operations primarily in the United States, Europe and Asia. The company has annual revenues of $350 million, and analysts don’t expect this to change much for 2015 and 2016.

Thermo Fisher expects to realize total synergies of approximately $70 million by year three following the close, consisting of approximately $55 million of cost synergies and approximately $15 million of adjusted operating income benefit from revenue-related synergies.

Ultimately, Thermo Fisher expects a few benefits from this transaction:

Significantly expands antibody portfolio to strengthen leadership in biosciences.
Adds genetic analysis capabilities serving clinical and applied markets.
Offers opportunity to leverage commercial and geographic scale.
Creates attractive financial benefits, adding $0.10 in earnings per share (EPS) in the first full year.

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Marc N. Casper, president and CEO of Thermo Fisher, commented:

The acquisition of Affymetrix will strengthen our leadership in biosciences and create new market opportunities for us in genetic analysis. In biosciences, the company’s antibody portfolio will significantly expand our offering in the fast-growing flow cytometry market, and customers will have greater access to these products through our global scale and commercial reach. In genetic analysis, Affymetrix’s technologies are highly complementary and present new opportunities for us in targeted clinical and applied markets. For shareholders, we expect the transaction to create value by generating attractive financial returns, including immediate accretion to our adjusted EPS.

Frank Witney, president and CEO of Affymetrix, added:

Joining Thermo Fisher creates significant value for our customers, employees and shareholders. We will be able to build on our strong history of close collaboration with customers in our target markets by leveraging Thermo Fisher’s deep relationships, particularly in biopharma, as well as their global scale and leading presence in Asia-Pacific. We are excited about the opportunity to combine our portfolios and strengthen our position in high-growth markets such as single-cell biology, reproductive health and AgBio. Our employees will benefit by being part of an industry-leading company, which brings many opportunities for career growth and development. We look forward to working closely with the Thermo Fisher team to ensure a smooth transition and integration.

Shares of Affymetrix closed Friday down 1.4% at $9.21, with a consensus analyst price target of $11.79 and a 52-week trading range of $8.28 to $13.11. Following the release of the announcement, shares jumped by about 50% to $13.68 in early trading indications Monday.

Thermo Fischer shares closed Friday relatively flat at $134.16, with a consensus price target of $156.64 and a 52-week range of $117.10 to $143.65.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.