Thermo Fisher Proposes $30 Billion All-Stock Acquisition of Illumina Amid Gene Sequencing Market Dominance

Yesterday, StreetInsider cited sources stating that Thermo Fisher Scientific plans to acquire Illumina, the global leader in gene sequencing, for $30 billion. The deal will not involve cash, and the offer represents a 20% premium over Illumina’s market price. Following the news, Illumina’s stock rose 3% to $174.22 by 1:25 p.m., while Thermo Fisher’s shares fell 1.1% to $152.95.

Bloomberg intelligence analyst Jonathan Palmer noted that Illumina is currently the undisputed leader in the gene sequencing market, holding a 75% market share. Approximately 90% of human genome sequencing is performed on Illumina instruments. If the acquisition goes through, Thermo Fisher will undoubtedly face antitrust issues in this market.

Cowen analyst Dou Schenkel also expressed a similar view, stating that the $30 billion acquisition price is currently insufficient to attract Illumina, while being too expensive for Thermo Fisher, making the likelihood of an acquisition virtually zero.

According to VCBeat (WeChat ID: vcbeat), Illumina rejected Roche’s $6.7 billion acquisition offer in 2012. Since 2011, Illumina’s annual revenue has doubled each year, reaching $2.2 billion in 2015, with its market capitalization peaking at $26 billion.

In recent years, Thermo Fisher has been actively acquiring companies with DNA decoding technologies. In 2014, it acquired Life Technologies for $15.4 billion, and this year it acquired Affymetrix for $1.1 billion. Moreover, it has placed bets on companies with new technologies, such as Grail, a startup that has developed blood tests for cancer detection, and Helix, which provides consumer genetic testing services for family ancestry.

Of course, the rumors were not entirely baseless. Illumina reported a net income of $121 million in its second fiscal quarter, with diluted earnings per share (EPS) of $0.82, or $0.86 when adjusted for one-time gains and losses, surpassing Wall Street analysts’ consensus estimate of $0.73 per share. Revenue for the same period reached $600.1 million, exceeding the $593.7 million forecast by Wall Street. The company projects full-year EPS to range between $3.48 and $3.58. Illumina’s stock has declined 22% year-to-date and 31% over the past 12 months. This continuous drop in share price has presented Thermo Fisher with a timely opportunity.

Currently, Eric Endicott, a spokesperson for Illumina, declined to comment on this matter, and it has not yet been possible to reach the head of Thermo Fisher.