Market Overview

Life Technologies Retains Two Investment Banking Firms for Review

Shares of Life Technologies Corporation (NASDAQ: LIFE) soared 11 percent on the open today after the company announced late last night that it had retained two strategic advisers. The Carlsbad, CA biotechnology firm is recognized as a leader in genomics research, cell biology and clinical diagnostic applications.

LIFE sells over 50,000 products and reported net profit of $378 million, or $3.73 per share, on revenues of $3.7 billion in 2011.

The story was broken late yesterday by the Canadian business publication Financial Post. They speculate that the buyout talk is in the range of $65 to $75 per share; shares closed yesterday at $54.97.

The Financial Post said that the company had hired Deutsche Bank Securities and Moelis & Co., who in turn were in discussions with at least four private equity firms for a potential leveraged buyout.

This activity is likely to spawn interest in LIFE by other biotechnology firms. LIFE's press release several hours later was terse, confirming only that the two named advisers were retained and that “The Board of Directors had not decided on any specific course of action”. The Financial Post cited sources who said that the strategic review process, which began last fall, is expected to be completed by the middle of February.

One sell-side analyst wasn't as bullish as the Financial Post regarding LIFE's takeout value. Jefferies & Co. analyst Jon Wood believes that “the $50 to $60 range is at present more realistic” in a research note disseminated this morning. Wood explained that his lower range is a function of the “risk appetite to be at present more limited than that observed prior to the 2008/2009 financial crisis”.

LIFE will announce its Q4 and 2012 results on Feb. 3. The Thomson/First Call consensus for Q4 is $1.11 vs. $1.06 on an expected revenue gain of 2 percent. That would produce full year EPS of $3.98 vs. $3.73, an advance of seven percent.

For 2013, analysts are projecting a pick-up in bottom-line growth. The 23 analysts are forecasting a nine percent gain in EPS to $4.34. Recent estimate trends have been positive, with consensus 2012 EPS up three cents and 2013 rising five cents over the past 90 days.

With the shares trading at $60.74 as of 12:30 EST Friday, the market is pricing the shares just above the Jefferies analyst's range and below the Financial Post's range. At yesterday's close, LIFE was at the high end of its trailing 52-week trading range of $39.73 to $55.11.

Volume so far today is in excess of 11 million shares, which is more than seven times the stock's average daily volume of 1.6 million over the last 90 days. Given the company's reported mid-February timeframe for reaching a deal and the statement that the process was initiated in the fall, it's likely that today's uncertainty about the outcome will not last long.

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