Illumina Rallies On Rumors Of Takeover By Thermo Fisher

Illumina Inc. (NASDAQ:ILMN) shares gained 2.7% to reach $173.75 yesterday, after a takeover rumor of this sequencing giant by healthcare conglomerate Thermo Fisher Scientific Inc. (NYSE:TMO) surfaced late last week. Following the release of this news, shares of Thermo Fisher dropped 0.4%, as largely expected.

Reportedly, Thermo Fisher has made an all-stock offer of $30 billion to acquire Illumina, which achieved revenue worth $600 million in the recently released second-quarter 2016 results and currently has a market cap of over $25 billion.

Surprisingly, majority of the analysts across the market view this takeover rumour to have no future; although the companies themselves have remained silent on this speculative deal.

According to one analyst, not only does Thermo Fisher already have its own sequencing business, but currently is in the middle of a $4.2 billion acquisition of the microscope corporation, FEI Company. This makes this deal highly improbable.

Notably, Thermo Fisher has long been on an acquisition spree. In fact, majority of the company’s business expansion involves rapid acquisition strategy. Considering this fact and the recent interest that Thermo Fisher has been exhibiting in extending its business in the next-generation sequencing (NGS), particularly with the acquisition of DNA-microarrays developer, Affymetrix (completed in Mar 2016); this rumour might not be worth dispelling at the moment.

Nevertheless even if this deal takes place in reality, this buyout transaction would face significant regulatory hurdles in its path of completion. As per one of the analysts from Wells Fargo (NYSE:WFC), the fact that Illumina holds a near monopoly in NGS and Thermo Fisher is the only current competitor with material scale in desktop sequencing, will make this regulatory hurdle even more complex.

Lastly, keeping aside all the aforementioned obstacles that this deal might face on the event of getting a go ahead, we believe if this deal does take place, it will surely benefit Thermo Fisher and help in its subsequent expansion in the multi-million dollar worth NGS market; with Illumina being a pioneer player in this space.

However, since no confirmed news has been received from either of the two companies rumoured to be in this deal, we keep our fingers crossed and hope for more definite declarations to come forward.

Currently, both Illumina and Thermo Fisher have a Zacks Rank #3 (Hold). Some better-ranked medical stocks worth mentioning are GW Pharmaceuticals plc (NASDAQ:GWPH) and Quidel Corp. (NASDAQ:QDEL) . Both these stocks sport a Zacks Rank #1 (Strong Buy).