What happened

Shares of Pacific Biosciences of California (PACB -5.77%) skyrocketed on Friday, up 66.9% as of 10:48 a.m. EDT. There's nothing like a big buyout to excite investors -- and that's exactly what happened for PacBio. Gene-sequencing giant Illumina (ILMN 3.50%) announced on Thursday evening that it plans to acquire PacBio for $1.2 billion. The news came at the same time PacBio reported dismal third-quarter results

So what

It's important to understand just how great the Illumina acquisition is for PacBio shareholders. Illumina's offer of $8 per share represented a 71% premium over PacBio's 30-trading-day volume-weighted average share price as of the market close on Oct. 31, 2018. The $1.2 billion total price tag of the deal is well above PacBio's highest market cap ever.

Palm extended with image of DNA double helix hovering above it

Image source: Getty Images.

But aside from the fantastic financial gains associated with the acquisition, joining Illumina could open up new opportunities for PacBio's technology. PacBio made its mark by developing long-read sequencing systems, while Illumina focused on short-read sequencing. Long-read sequencing is a lot more expensive than short-read sequencing, but it's better suited for certain applications.

With PacBio becoming part of Illumina, customers will be able to go to one vendor to meet all their sequencing needs. Illumina also brings the capital needed to fund further development of PacBio's single molecule real time (SMRT) sequencing technology. Over the years, Illumina has driven the cost of short-read sequencing down tremendously. It just might be able to accomplish a similar feat in long-read sequencing.

PacBio was doing pretty well on its own this year. Its share price was up more than 60% even before the Illumina buyout news. However, the company fell victim to its own success in a way in the third quarter. Customers appeared to hold off on placing orders while they waited on new products that PacBio was introducing to the market.

Now what

Illumina stated that it expects the acquisition of PacBio to close in the middle of 2019. While investors wait for the transaction to finalize, they could see more good news for PacBio.

CEO Mike Hunkapillar said that the company has been "very pleased with the enthusiastic response from our customers on the launch of our new 3.0 chemistry and 6.0 software in October." In addition, PacBio plans to launch its new 8M SMRT Cell and platform in the first quarter of 2019.