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Thermo Fisher Abandons Gatan Deal in Want of European Nod

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Thermo Fisher Scientific Inc. (TMO - Free Report) recently scrapped its earlier-announced agreement to acquire Gatan, Inc, a wholly-owned subsidiary of Roper Technologies, Inc (ROP - Free Report) . This $925-million deal, inked last June, got cancelled as both companies were facing challenges in obtaining a regulatory approval in the United Kingdom.

However, the impact of this setback is yet to get reflected through Thermo Fisher’s share price, which was up 0.73% to $283.76 at yesterday’s close.

Notably, Thermo Fisher wanted to strengthen its Analytical Instruments business with the integration of Gatan’s technologies. The company aimed at building an integrated system combining Gatan’s technologies with its electron microscopy portfolio to consistently connect microscope hardware, software and accessories.

The Issue at a Glance

Going by a Reuters article, this decision came when Britain's competition watchdog, the Competition and Markets Authority (CMA), stated that stated that the acquisition could raise concerns as prices of microscopes could go up and quality might suffer.

More specifically, CMA raised antitrust concern against this investment by Thermo Fisher on the fear that the deal could enhance Thermo Fisher's already strong market position in this space which may result in surge in microscope prices while reduce quality.

However, Thermo Fisher noted that this is not the end of alliances with Roper as both will continue with their existing long-term supply contract, under which Gatan delivers filter systems, cameras and software to Thermo Fisher's electron microscopy business.

Strategic Buyouts: A Major Driver

As part of its strategy to effectively deploy capital, Thermo Fisher has undertaken several acquisitions in the recent past. Along with boosting revenue accretion, these deals have historically benefited the company’s operating margin and resulted in tax synergies. Thermo Fisher's $7.2-billion buyout of the Netherlands-based Patheon, a global provider of high-quality drug solutions to pharmaceutical and biopharma sectors, is successfully expanding its biopharma service portfolio in Europe. Another development in the acquisition league is the company’s takeover of Affymetrix for a value worth $1.3 billion. This consolidation has started to drive Thermo Fisher’s offering in the fast-growing flow cytometry market through an advanced antibody portfolio.

Price Performance

Over the past year, shares of Thermo Fisher have outperformed its industry. The stock has rallied 30.2% against the industry’s 2.3% fall.

Zacks Rank & Key Picks

Thermo Fisher carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the broader medical space are Cerner Corporation (CERN - Free Report) and Bruker Corporation (BRKR - Free Report) . While Cerner sports a Zacks Rank #1 (Strong Buy), Bruker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cerner’s long-term earnings growth rate is expected to be 13.5%.

Bruker’s long-term earnings growth rate is estimated at 11.7%.

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