Thermo Fisher Scientific Inc. (TMO) is looking toward a transformational acquisition of Life Technologies Corp. (LIFE) in early 2014, which will bring both cost and revenue synergies, making TMO a long-term value for investors, says Steven Howard, Managing Director at Global Investment Solutions.
“TMO has been able to bolt on new business lines to its existing distribution infrastructure to achieve solid and sustainable EPS growth. More recently, TMO announced that it would acquire a company called Life Technologies, which we believe will be transformational. The deal is expected to close in early 2014. Excluding the positive impact of the Life deal, we believe the strong cost focus and the ability to leverage its distribution system allows the company to potentially turn organic topline growth rates of around 3%, into a consistent and greater EPS growth story,” Howard said.
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Howard sees the potential for cost and revenue synergies with the transaction, as LIFE brings about a strong installed base, significant revenues and strong cash flow. Thus, despite possible near-term headwinds in Chinese growth and the sequestration in Washington, Howard believes TMO can offer investors significant long-term value.
“Life Technologies is already a leader in life science tools and analytical tools, and benefits from a strong installed base, significant recurring revenues and strong cash flow. As part of the larger Thermo Fisher organization, we see the potential for both cost and revenue synergies. Further, we believe it fits well with the theme of increased lab spending over the long term. It complements Thermo’s focus on providing solutions to the people in ‘white coats’ who parse the human genome, test and measure pollution levels and ensure a safe food supply,” Howard said.
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