FAIRFIELD, Conn.—GE will spend approximately $1.06 billion to gain Thermo Fisher Scientific’s HyClone cell culture media and sera business, as well as its gene modulation and magnetic beads businesses—a trio that brought in combined annual revenues of approximately $250 million in 2013 for Thermo. The businesses will become part of GE Healthcare.
Both companies have compelling reasons for the deal, though Waltham, Mass.-based Thermo has perhaps the more pressing motivation. As it moves to close on its $13.6 billion acquisition of Life Technologies Corp., Thermo says it needs to shed those businesses to speed up European Commission approval of the transaction. Thermo is also awaiting approval from the U.S. Federal Trade Commission, but had not received any indication that it would need to get rid of any assets to gain that approval.
As noted by Dana Blankenhorn at The Street, the businesses being sold are a “drop in the bucket next to Thermo Fisher's 2012 sales of $12.5 billion,” but the sales need to be made because, in part, the Europeans are worried that Thermo Fisher otherwise would have controlled almost half the market in cell culture materials once it added Life Technologies’ products to its own.
In related news, China's Commerce Ministry announced in mid-January that it had approved Thermo’s acquisition of Life Technologies, contingent on the promise that Thermo reduce the prices of certain products sold in China, sell its cell culture and gene adjustment businesses and lose its 51-percent stake in China's Lanzhou National Hyclone Bio-engineering Co. Ltd.
For GE, part of the push for a big life-sciences purchase is that it is divesting itself of its consumer-finance division this year and it is looking to boost other business segments. Although that finance division rakes in more than $2 billion annually, GE is apparently concerned about exposure to the banking market and risks therein. GE’s CEO, Jeffrey Immelt, noted late last year that margins and earnings for GE Healthcare make up about 13 percent of the GE’s total revenue and that he expects that to improve this year.
“Life Sciences is one of our strongest and fastest-growing business areas, driven by the world's demand for improved diagnostics and new, safer medicines,” John Dineen, GE Healthcare’s president and CEO, said in the news release about the Thermo acquisitions. “Combining GE’s engineering expertise with our capabilities in life sciences is already bringing great benefits to industry, research and patients. This deal makes a good business even better and will help us realize our vision of bringing better healthcare to more people at lower cost.”
The complementary product offerings and strong strategic fit of the acquired businesses will enable GE Healthcare to expand and accelerate the development of innovative “end-to-end” technologies for cell biology research, cell therapy and for the manufacture of innovative biological medicines and vaccines, the company noted in the news release, adding, “The acquisition is consistent with GE’s strategy to invest in high-technology, innovative businesses that deliver strong top-line growth and expanded margins.”
Cell culture plays a key role in manufacturing medicines to treat diseases such as cancer and rheumatoid arthritis, as well as a new generation of vaccines, GE points out, and the feeling is that Thermo Fisher’s HyClone cell culture media and sera products are “highly complementary to GE Healthcare’s established technologies for cell biology research and biopharmaceutical manufacturing, enabling GE to offer its customers a substantially wider range of technologies and services.”
Thermo’s gene modulation technologies are said to strongly complement GE’s established technologies for drug discovery research, while the Sera-Mag magnetic beads product line will extend GE’s existing technologies in protein analysis and medical diagnostics.
“We look forward to the HyClone cell culture and other businesses joining the GE family,” said Kieran Murphy, president and CEO of GE Healthcare’s Life Sciences division. “They are a great fit with our key areas of focus, and bring exciting new technologies, enhanced manufacturing capabilities as well as a great group of talented people to help grow our business.”
But the acquisition of the Thermo businesses isn’t only about providing GE with new approaches to drug discovery and biomedical research, Murphy said, noting that it also expands the company’s footprint globally, among other things.
“This acquisition is a significant step forward for our customers in biopharmaceutical manufacturing. They will benefit immediately from an expanded range of ‘start-to-finish’ technologies that will help them improve product yields and reduce time-to-market,” he said. “By expanding our production facilities to three continents, we will be able to offer the biopharmaceutical industry greater confidence in the security of supply of cell culture media and sera, a key part of their production process.”
Overall, GE has been building out its life-sciences business since 2003, with the two most recent notable acquisitions being cellular-imaging supplier Applied Precision Inc. in 2011 and biopharmaceutical manufacturing technology supplier Xcellerex Inc. in 2013.
GE’s acquisition of Thermo’s businesses was anticipated to close in the first half of 2014.