Thermo Fisher to buy Dionex for $2.1 billion

By Lewis Krauskopf

NEW YORK (BestGrowthStock) – Scientific instruments maker Thermo Fisher Scientific Inc (TMO.N: ) is set to acquire Dionex Corp (DNEX.O: ) for $2.1 billion to broaden its lab-equipment offerings and boost its presence in Asia.

Dionex shareholders will receive $118.50 per share, representing a 21 percent premium over Friday’s closing price, according to the deal announced on Monday. Its shares climbed to $118.20, just below the deal value, in morning Nasdaq trading.

Thermo shares also rose, by 3.1 percent, as the deal is expected to immediately boost profits after closing.

Dionex is the world’s third-biggest player in chromatography systems, which are used in analysis for everything from drug compounds to water quality to food contaminants.

The systems allow components of a mixture to be separated before they are put into a mass spectrometer device for analysis. Thermo is a major player in mass spectrometry, and called Dionex “highly complementary” to its products.

“It takes that technology that Dionex has and now exposes it to the full scale of Thermo Fisher’s reach,” said Quintin Lai, an analyst with Robert W. Baird.

The deal also continues the trend of consolidation in the life-sciences tools space, Lai said.

“Thermo, being the largest player out there, continues to look for different properties to add that would complement its portfolio,” Lai said. “This is one of the areas where it does not have much exposure. That’s why they went after it.”

Dionex, which is based in Sunnyvale, California, and has more than 1,600 employees, introduced the first ion chromatography system for water analysis shortly after its founding in 1975, the companies said in announcing the deal.

In addition to increasing its lab-equipment offerings, the acquisition will also allow Thermo to expand its presence in the Asia-Pacific region. Dionex generates more than 35 percent of its revenue in Asia-Pacific and other emerging markets. It reported nearly $420 million in sales for its most recent fiscal year.

Thermo reported revenue of $10.1 billion last year.

Dionex also serves customers in food safety, environmental analysis and other industrial sectors, where Thermo sees growth potential beyond its main customer base in the biotechnology and pharmaceutical research sector.

Thermo shares were up $1.62 to $54.66 in morning trading on the New York Stock Exchange.

Thermo expects the deal to increase its adjusted earnings per share by 13 cents to 15 cents in the first 12 months after closing, which is projected for the first quarter of 2011. Thermo is expected to post earnings of $4.00 per share next year, according to Thomson Reuters I/B/E/S.

It expects $60 million in cost savings and other merger benefits in the third year after closing the Dionex deal.

Earlier this year, Thermo lost out to German-based Merck KGaA (MRCG.DE: ) in a bid to buy Millipore Corp and its biotechnology production business. Merck bought Millipore for $6 billion.

At the time, analysts said Thermo would continue to hunt for deals, though not necessarily those the size of Millipore.

Barclays Capital and J.P. Morgan Securities LLC are Thermo’s financial advisers, while its legal counsel is Wachtell, Lipton, Rosen & Katz. Goldman Sachs and Cooley LLP are advising Dionex.

(Reporting by Lewis Krauskopf; Editing by Lisa Von Ahn and John Wallace)

Thermo Fisher to buy Dionex for $2.1 billion