As part of its plan to pay for the acquisition of Life Technologies (NASDAQ: LIFE ) , life-sciences specialist Thermo Fisher Scientific (NYSE: TMO ) announced yesterday that it was selling 25.7 million shares at $85.50 per share in a public offering of its stock.
Thermo Fisher entered into forward sale agreements with affiliates of JPMorgan Chase and Barclays, which are expected to borrow from third parties and sell Thermo Fisher's stock to the public. The life-sciences company also granted the underwriters a 30-day option to purchase an additional 3.8 million shares of stock to cover any overallotments.
A forward sales agreement is a contract between two companies that gives one the right to buy or sell an asset from the other at some time in the future. No actual cash changes hands until the contract expires.
The forward sale agreements are expected to be settled around the time Thermo Fisher closes on the Life Technologies deal, which it anticipates happening sometime in early 2014, but no later than 14 months after June 6.
While Thermo Fisher expects to settle the agreements entirely by the physical delivery of its stock, it may also choose cash or net share settlement for all or a portion of its obligations under the agreements. Upon the physical settlement of the forward sale agreements, Thermo Fisher will deliver its stock in exchange for cash at the forward sale price of $83.277 per share.
JPMorgan and Barclays are acting as joint book-running managers and as representatives of the underwriters for the offering, while Bank of America's Merrill Lynch division is acting as book-running manager for the offering.