Invitrogen to buy Applied Biosystems for $6.4B

Life sciences equipment maker Invitrogen Corp. agreed Thursday to pay $6.4 billion for Applera's Applied Biosystems Group in hopes of creating a one-stop shop for biomedical researchers.

Carlsbad-based Invitrogen will pay $38 per share _ a 17 percent premium to the stock's closing price Wednesday _ for Foster City-based Applied Biosystems, which specializes in advanced gene-sequencing systems.

The purchase price will be paid 45 percent in cash and the rest in stock. Based on the 168.7 million Applied Biosystems common shares outstanding at May 5, the deal is valued at $6.4 billion. In a statement, the companies valued the transaction at $6.7 billion.

The deal, which both companies' shareholders must still approve, is expected to close this fall.

Applied Biosystems is one of several competitors in the race to develop faster, cheaper DNA analysis devices for sequencing human genes. Earlier this year, the company announced it had sequenced an entire human genome for less than $60,000, down from the $3 billion spent on the Human Genome Project just five years ago.

Invitrogen makes a broad range of biochemicals and equipment used in government, academic and corporate medical research labs.

The two companies' complementary technologies "will drive the price of decoding that genome ever lower," said Invitrogen Chief Executive Greg Lucier in an interview with The Associated Press.

The new company will take the Applied Biosystems name and be led by Lucier. Applied Biosystems Chief Operating Officer Mark Stevenson will serve as COO, while Invitrogen Chief Financial Officer David Hoffmeister will retain his position.

A main goal for the new company will be to develop technologies to both fuel and serve the latest discoveries tying individuals' genetic makeup to a host of health conditions.

"Certainly the promise of personalized medicine _ getting the right drug at the right time to the right patient _ is absolutely a driver in thinking about future markets," Stevenson said.

The deal will also allow the new company to ramp up efforts to enter the emerging biomedical research markets in South Korea, China and India, executives said.

The new company's board will include Invitrogen's nine current directors along with three members from the current Applera board.

Applied Biosystems shares rose $1.72, or 5.3 percent, to $34.16 while Invitrogen shares dropped $4.62, or 11 percent, to $38.73.

Some analysts worried that the new company could miss out on advances in gene-sequencing technology while caught up in the disruption caused by the acquisition.

The time needed to shore up some of Applied Biosystems' struggling business units could also eat into the new company's ability to deliver higher returns, said Ross Muken, a life sciences equities analyst for Deutsche Bank-North America.

"You could certainly see where the potential of the combination could be realized," Muken said. "The question is, given the underperformance of many of these businesses, how long will it take to turn them around?"

In a note to investors shortly after the deal was announced, Cowen & Co. analyst Doug Schenkel said the price was lower than he expected and suggested it could have been done for as much as $43 per share. He said there may be significant challenges in combining the two companies.

The merger is expected to be neutral or add slightly to Invitrogen's earnings per share in the first year, and add "significantly" in year two, the companies said.

On a conference call, the companies said the deal will lead to at least $175 million in "synergies" by the third year after the deal closes. About $125 million will come from annual cost savings.

Invitrogen maintained its 2009 full-year profit guidance of $2.60 per share. Analysts polled by Thomson Financial currently expect profit of $2.42 per share.

The company said it will use cash on hand and proceeds from a fully underwritten debt financing from Bank of America, UBS Investment Bank and Morgan Stanley to fund the cash portion of the purchase price.

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AP Business Writer Jennifer Malloy in New York contributed to this report.