Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission conditionally approves Thermo Fisher’s acquisition of Life Technologies, (Nov 26, 2013)

By Tobias J. Gillett, J.D., LL.M.

Thermo Fisher Scientific Inc.’s offer to divest cell culture, gene silencing, and polymer-based magnetic bead businesses has resolved European Commission (EC) concerns over its acquisition of rival Life Technologies Corp. Thus, the EC announced today that it has cleared the acquisition, subject to the divestitures.

Under the terms of the transaction, Thermo Fisher would acquire Life Technologies for approximately $13.6 billion, and assume approximately $2.2 billion in net debt. The EC’s investigation of the transaction had revealed that it could significantly reduce competition in the European Economic Area in the market for the production and supply of (1) media and sera for cell culture—water-based and blood-based liquids used to supply nutrients to cells growing in vitro, (2) gene silencing products—research tools used to inhibit the expression of a particular gene, and (3) polymer-based magnetic beads—particles used principally in immunology and molecular biology instruments and sold to manufacturers of those instruments.

According to the EC, the combined entity would possess large market shares in the cell culture media markets, which had significant barriers to entry from the time and investments needed to establish reliability as a supplier. In the cell culture sera markets, the combined entity would possess an excessively strong position compared to its competitors, particularly in the supply of sera from the safest and most expensive origins. The markets also had high barriers to entry and a limited availability of blood, the required material. In the market for gene silencing products, the combined entity would have a strong position with respect to small interfering RNA (siRNA) and microRNA (miRNA) reagents and would face a limited number of significant competitors. The market also had high barriers to entry. Finally, the combined entity would hold a strong position in the market for magnetic beads and would face a limited number of competitors. The market also had high barriers to entry from intellectual property rights, technical know-how, and established commercial relationships.

To resolve these concerns, Thermo Fisher committed to divest: (1) its HyClone business regarding media and sera for cell culture (excluding single use technologies, where the parties’ activities do not overlap); (2) its gene modulation business (including gene silencing) in Lafayette, Colorado, including the Dharmacon and Open Biosystems brands, equipment, staff, and its license regarding certain patents; and (3) its polymer-based magnetic beads business (including the Sera-Mag brand and all other relevant IPRs, customer contracts, personnel, and the necessary production equipment). In addition, Thermo Fisher would commit to a 2-year transitional agreement to supply magnetic beads to the purchaser.

The EC fund that these divestitures would resolve its concerns, and therefore approved the merger conditioned upon their completion. The EC also found that the transaction would not raise competition concerns as to a variety of other life science products, including nucleic acid amplification products, human leukocyte antigen (HLA) typing kits, protein biology products, and the distribution of laboratory and life science products.

The EC cooperated closely on the investigation with the FTC, the Australian Competition and Consumer Commission (ACC), China’s Ministry of Commerce (MOFCOM), the Japan Fair Trade Commission, Canada’s Competition Bureau, and New Zealand’s Commerce Commission.

“The remedies preserve competition and innovation in the life sciences industry,” said Joaquin Almunia, Commission Vice President responsible for competition policy. “The Commission’s investigation of these complex markets was conducted in close cooperation with a significant number of competition authorities worldwide, such as the U.S. FTC and the Australian ACCC, making this global case a good example of international cooperation.”

Thermo Fisher press release. According to a press release, although regulatory review remains pending in other jurisdictions, including before the FTC, Thermo Fisher “does not believe any additional divestures will be required in order to receive U.S. approval.” Thermo Fisher expects to close the transaction in early 2014.

Companies: Life Technologies Corp.; Thermo Fisher Scientific Inc.

News: Antitrust