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Following a rumor that Life Technologies would be acquired by its peer Thermo Fisher Scientific Inc. (TMO - Analyst Report) or by a consortium of a number of private equity firms for approximately $12 billion, the shares of Life Technologies reached its 52-week high of $67.85 on Tuesday.

According to several media sources, Thermo Fisher, which was working on a bid to buy Life Technologies over the past months, offered a bid price of more than $65 a share. Although the credibility of this deal remains uncertain, its materialization will turn out as the biggest ever deal for Thermo Fisher since its inception in 2006 through a $12.8 billion merger between Thermo Electron and Fisher Scientific International.

Reuters stated that, as per several people familiar with the matter, a consortium of some private equity firms was formed to takeover Life Technologies with a bid close to $65 per share. Immediately after that, yesterday, Thermo Fisher made a binding offer.

Thermo Fisher met the bid deadline but the private equity firms who were working on the joint bid, missed it. These firms are currently working on it in order to secure the equity needed to take Life Technologies private. The source also stated that, over the recent past, Thermo Fisher had been considering to bid for a potential takeover of Life Technologies in the range of $65−$70 per share.

Our Take

Thermo Fisher has undertaken several acquisitions in the past that have added complimentary technologies, expanded presence in high-growth markets, generated both cost and revenue synergies thereby creating shareholder value. The proposed acquisition of Life Technologies in this regard, if completed, will create a solid position for Thermo Fisher in the field of genetic research and analysis.

However, considering Life Technologies’ current market cap, which lags a mere $1 billion from the bidding price, we are doubtful about the materialization of the deal. Based on the past record and observing once again the steady fundamentals of Life Technologies along with its huge opportunities in the growing gene-sequencing market, we remain skeptical about the credibility of the acquisition news. We prefer to remain on the sidelines until more visibility is obtained in this regard.

Currently, both Thermo Fisher and Life Technologies carry a Zacks Rank #3 (Hold). However, other stocks in the medical device sector, carrying a Zacks Rank #1 (Strong Buy), such as Given Imaging and Cyberonics Inc. (CYBX - Analyst Report) appear impressive.

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