Lab-equipment company Thermo Fisher Scientific Inc. said Monday it would buy drug-development technology company Patheon NV in a deal worth about $5.2 billion.
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Patheon shareholders will receive $35 in cash per share, representing a 35% premium from Friday's closing price of $26. Thermo Fisher will also assume about $2 billion of net debt.
Thermo Fisher, which provides equipment, chemicals and other raw materials necessary to do pharmaceutical research, said the deal gives it a way into the high-growth end-to-end biotech solutions market. Patheon is a so-called contract development manufacturing organization, helping biopharmaceutical firms take on complex development and manufacturing needs.
Analysts at Credit Suisse estimate that the highly fragmented CDMO market is valued at over $40 billion and growing about 5% annually as rising health utilization and a heavy regulatory environment are expected to drive pharmaceutical companies to outsource more often. Over the past decade, Patheon has manufactured 21% outsourced drugs approved by the Federal Drug Administration.
The deal, expected to close by the end of the year, still requires regulatory and shareholder approval, though Thermo Fisher said it has already secured agreements with affiliates of JLL Partners and Royal DSM to support the deal. They hold a combined 73% stake in Patheon, Thermo said.
Thermo Fisher has relied largely on acquisitions for growth, spending $5.5 billion on deals during the 2016 fiscal year. The company expects the latest transaction to contribute 30 cents a share to its bottom line in the first full year after closing.
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In the short term, Chief Executive Marc Casper said Thermo Fisher was focused on successfully completing the Pantheon transaction, but more acquisitions are on the horizon.
"You will continue to see us be an active participant in the consolidation of our industry," he said in an interview.
Patheon stock shot up 33% during morning trading, approaching the deal price and offsetting a 17% decline over the past three months through Friday's close. Thermo Fisher's stock, which had already gained 22% so far this year, edged up 0.9% to $173.02.
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(END) Dow Jones Newswires
May 15, 2017 11:37 ET (15:37 GMT)