DNEX Dionex Corp. (MM)

Thermo Fisher Scientific (TMO) has extended the tender offer to acquire shares of Dionex Corporation (DNEX) till May 13, 2011.

However, the other conditions remain unchanged.

The company had extended the tender offer earlier in January as well. Thermo Fisher expects to complete the deal in the second quarter of fiscal 2011. Through April 1, 2011, about 44% of Dionex shares had been tendered.

In January, the company received antitrust clearance in the US with respect to the acquisition. However, Thermo Fisher has yet to receive approval in Europe. The European Commission accepted the company's merger filing on April 4 and has to review the deal within 25 days, or May 13, 2011.

Earlier, in December 2010, Thermo Fisher decided to acquire California-based Dionex, a leading manufacturer and marketer of chromatography systems, for $118.50 per share or a total consideration of $2.1 billion. This acquisition promises $60 million of operating synergies in three years after the close of the transaction and would be accretive to the company’s bottom line by 13-15 cents within the first year of closing. In order to finance the acquisition of Dionex, Thermo Fisher in February 2011 offered $2.2 billion of senior notes.

By combining the ion and liquid chromatography capabilities of Dionex with its existing chromatography offering, Thermo Fisher expects to create an industry-leading chromatography portfolio. This in turn will further strengthen its leading position in mass spectrometry business.

The company will also benefit from Dionex's extensive customer base in applied markets such as environmental, food safety and other industrial sectors. Moreover, with more than 35% of revenues being derived from Asia Pacific and other emerging geographies, Dionex fits perfectly into Thermo Fisher’s strategy of expansion in these high-growth regions.

Recommendation

A gradual improvement in the economic scenario along with its focus on potential markets and other strategies should drive Thermo Fisher’s top line in the forthcoming period. Moreover, the company’s strong cash position should assist in making suitable acquisitions, reduce debt burden or repurchase shares. However, any kind of economic turbulence could negatively impact the company’s sales based on financial constraints and customers deferring their buying decisions.

We are currently ‘Neutral’ on the stock, which also corresponds to a Zacks #3 Rank (hold) in the short-term.

 
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