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Thermo Fisher deal for Qiagen falls apart after companies fail to secure investor backing

Thermo Fisher Scientific announced Thursday it would terminate a planned $12.5 billion deal to acquire molecular diagnostics company Qiagen after its bid failed to win sufficient investor support. As a result, Qiagen will pay Thermo Fisher $95 million in expense reimbursement.Thermo Fisher had recently increased its offer to 43 euros per Qiagen share, up from an earlier proposal of 38 euros. For the deal to go through, two-thirds of Qiagen shareholders had to tender their shares by Aug. 10. On Thursday, however, Thermo Fisher disclosed only 47% shares were tendered.

Until recently, the deal had been the largest announced in the medtech sector this year. But two weeks ago Siemens Healthineers said it would acquire radiation oncology specialist Varian Medical Systems for $16.4 billion, and then last week Teladoc bought digital health platform Livongo for $18.5 billion.

Thermo Fisher’s deal for Qiagen, initially valued at $11.5 billion, was made public the week before the World Health Organization declared the new coronavirus a pandemic, setting off a test and supplies boom for both companies.

But shareholders argued Qiagen was worth more, forcing Thermo Fisher to raise its offer.

The testing giant may not be too hurt by the deal’s rupture, however. SVB Leerink analysts wrote in a note to investors Thursday that they see “limited to no downside” for Thermo Fisher given its diversified business and a predicted continued benefit from COVID-19 testing.

Evercore ISI analysts, however, argued Thermo Fisher’s vaccine revenues are more sustainable than diagnostics. While fiscal year 2021 is “likely to see some continued benefit from testing” it is unlikely to be sustained over the long term, they wrote.

Going forward, Qiagen CEO Theirry Bernard said the company will proceed with plans for the full acquisition of COVID-19 and flu test developer NeuMoDx.

Qiagen on August 4 published second quarter results showing soaring demand in Asia Pacific and other ex-U.S. territories, driving sales growth during the pandemic. While sales in the Americas fell, double-digit growth in the Europe, Middle East and Africa region and Asia Pacific sent global revenue higher by 16%.

The deal dates back to October, when Qiagen received three expressions of interest in a takeover after a series of developments that sent its stock down 20%. Two more companies entered the running to buy Qiagen in November. Negotiations dragged on into the new year, with multiple parties discussing non-binding bids of between $36 and $44 a share.

Qiagen pushed for $46 a share as negotiations with Thermo Fisher neared their conclusion, but settled for a bid that worked out at just below $43 at the then-current exchange rate.

At the time, Thermo Fisher expressed confidence in its ability to close the takeover. However, the COVID-19 crisis worsened shortly after Thermo Fisher agreed to buy Qiagen, leading investors to reassess the value of the European company.

Last month, institutional investor Davidson Kempner argued Thermo Fisher’s original offer “severely” undervalued Qiagen. The investor, which owned 3% of Qiagen at the time, said “COVID-19 has a material long-term impact on the diagnostics industry, and that these trends are going to be a significant driver for the Company’s prospects and fundamental value over the short and long term.”

The hedge fund claimed victory on Thursday: “The low acceptance level of 47.02% is a clear signal that there is widespread confidence in the long-term prospects of Qiagen.”

Davidson Kempner posted its first letter seeking a higher bid on July 10. By then, Qiagen was already discussing whether to start negotiations with Thermo Fisher over an improved offer. Qiagen sent a letter to Thermo Fisher asking to restart negotiations in light of COVID-19 on July 9.

Within a week, Thermo Fisher and Qiagen had agreed to a 10% increase in the offer and a reduction in the minimum acceptance threshold from 75% to 67%. The threshold determines the percentage of Qiagen shares that needed to have been validly tendered by the close of the offer period.

The revised deal failed to quell Davidson Kempner’s opposition to the takeover. Early this month, it increased its stake in Qiagen to 8% and said it would not tender its shares under the revised offer. Davidson Kempner put the standalone fair value of Qiagen as high as 52 euros, or $61 a share, around 18% above Thermo Fisher’s improved offer.