TMO to Acquire Lomb Scientific - Analyst Blog

Recently, Thermo Fisher Scientific (TMO) decided to acquire Lomb Scientific, which deals in laboratory chemicals, consumables and instruments in Australia and New Zealand. Lomb Scientific, with an employee strength of 100 and revenues of AUD$ 34million, has a wide client base which includes hospitals, universities, research andanalytical laboratories in both Australia and New Zealand. In addition, Lomb Scientific's client base has expanded across Asia and the Middle East. However, terms of the deal were not disclosed.

With Lomb Scientific, Thermo Fisher plans to expand in the Asian and Pacific markets which hold out immense potential. The company derives revenues from two segments – Analytical Technologies and Laboratory Products and Services. During the last reported quarter, Laboratory Products and Services recorded revenues of $1650.8 million, up 1.2% (2% organic growth) from the year-ago quarter.

The company witnessed strong growth in sales of laboratory equipment and consumables across academic and government, biopharma and industrial end markets partially offset by the previous year's flu season and the Biosite contract termination. This acquisition will further strengthen the segment and increase its scope in the areas of pathology and expand its presence in strong industrial markets such as mining.

Thermo Fisher has acquired many companies in the recent past to strengthen its product portfolio which includes Fermentas International, Proxeon and Finnzymes. A strong cash balance augurs well for suitable acquisitions and it has been noted that the acquisitions made over the past 12 months have been performing better than the company's average. Consequently, acquisitions are considered to be significant contributors to growth and profitability going forward.

Thermo Fisher exited the third quarter of 2010 with $930.2 million in cash and cash equivalents, down from $1.3 billion at the end of the second quarter of 2010. Apart from acquisitions, the company buys back shares to reward shareholders. During the quarter, the company repurchased 10.1 million shares amounting to $475 million. For 2010 till date, Thermo Fisher has spent $663 million on its buyback program and was left with $837 million of authorization.

We are currently Neutral on the stock.