Banking

Thermo Expands Its Biggest Business With $17.4 Billion PPD Buyout

Thermo Fisher Scientific (TMO) is buying clinical researcher PPD in a $17.4 billion cash-and-debt deal, the companies said Thursday as TMO stock and PPD stock popped.




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Under terms of the deal, Thermo Fisher will pay $47.50 per share of PPD stock in cash. That represents a 24% premium to the closing price of PPD stock on Tuesday. In addition, Thermo Fisher will take on $3.5 billion in net debt.

“The acquisition of PPD is a natural extension for Thermo Fisher and will enable us to provide these customers with important clinical research services and partner with them in new and exciting ways as they move a scientific idea to an approved medicine quickly, reliably and cost effectively,” Thermo Fisher Chief Executive Marc Casper said in a written statement.

In early action on the stock market today, TMO stock rose 3% near 492.10. PPD stock jumped 7% near 46. Currently, TMO stock is forming a double-bottom base with a buy point at 526.69. PPD stock broke out of a cup-with-handle base after topping an entry at 38.73 in late March, according to MarketSmith.com.

TMO Stock, PPD Stock Pop On Takeover

PPD belongs to the $50 billion clinical research services industry. It provides clinical research and laboratory services to help biopharma companies develop drugs. Last year, PPD generated $4.7 billion in sales.

Thermo Fisher expects the deal to be “immediately and significantly” accretive. The transaction will add $1.40 to adjusted earnings per share in the first 12 months following the close. Thermo also expects total synergies of $125 million by year three after the deal wraps.

The deal is expected to close by the end of 2021. When it does, PPD will join Thermo’s laboratory products and services business. In 2020, that business generated $12.24 billion in sales, growing 16%. That was Thermo’s biggest business, though its specialty diagnostics and life sciences units posted stronger growth in 2020.

PPD stock climbed 14.1% in 2020 as TMO stock soared 43.4%.

Rumors of the deal helped PPD stock soar 12.1% on Wednesday. On the same day, TMO stock slipped 1.4%.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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