Lab supply giant
The recently announced merger of two US-based companies, Thermo Electron Corp. and Fisher Scientific creates a dominating player in the lab equipment business. Technically, Thermo is acquiring Fisher for $10.6 billion, even though Fisher is the bigger company and Fisher stockholders will end up with 60% share of the final company, to be named Thermo Fisher.
Thermo Electron makes such devices as chromatographs, spectrographs, centrifuges, radiation detectors, and flow meters. Fisher Scientific makes lab chemicals, diagnostic kits, and resells, via catalog, a wealth of consumable supplies from smaller vendors, ranging from test tubes to respirators. It also provides a number of software and support services to pharmaceutical labs.
Both companies have gobbled up other scientific equipment makers over the years. In 2005, for example, Thermo Electron acquired NITON LLC (a supplier of X-ray machines used to analyze metals), R&P Inc. (a maker of sensors for monitoring particulates in the air), and Ionanalytics (a maker of ion spectrometers used in the drug industry). In 2006, Fisher Scientific acquired Alhena Diagnostics (a maker of diagnostic kits for neurological and other diseases), Clintrak Pharmaceutical (a provider of clinical trial printing services), and in 2005 McKesson BioServices (a provider of biological and clinical supply management services).
The new company will be the leading US provider of such equipment to pharmaceutical, government, and university laboratories. According one expert quoted in BusinessWeek ("Thermo Electron, Fisher Scientific in Deal", 5/8/06) "the deal will create the first lab supply company offering both reusable instruments and consumable supplies such as chemical powders." Most competitive companies have sales of $2 to $3 billion a year, while the new company will have sales of over $9 billion.
A Wall Street Journal article ("Thermo, Fisher Set $10.6 Billion Pact", 5/8/06) notes that:
According to the people familiar with the matter, the companies' goal is to put together Thermo's products with Fisher's products and distribution network to create a one-stop shop for customers. …. The deal is sure to put pressure on the bevy of smaller players in the industry, who generally have market capitalizations in the $2 billion to $4 billion range.
It is, as usual, likely that smaller players in this area will scramble to gain mass through mergers and acquisitions, lest they be crush by such a wide-ranging competitor.
