Why did the Thermo Fisher-Qiagen deal fall apart?

Chloe Kent 27 August 2020 (Last Updated August 25th, 2020 16:35)

Thermo Fisher’s attempted takeover of Qiagen has been left in tatters, after the Covid-19 pandemic provided a substantial boost to the value of the diagnostic technology firm. But was Qiagen shareholders’ decision not to tender the right one?

Why did the Thermo Fisher-Qiagen deal fall apart?
Themo Fisher’s portfolio of over 200 Covid-19 vaccine and therapeutic candidates may turn out to be more future-proof than Qiagen’s offering. Credit: Wikimedia Commons

On 13 August, Thermo Fisher Scientific announced that its bid to acquire diagnostic technology firm Qiagen had failed and the planned deal was terminated. The deal, which was made public a week before the World Health Organisation announced that the spread of Covid-19 had reached pandemic levels, had been on track for one of the largest deals in medtech this year.

ThermoFisher initially offered Qiagen €39 per share, which it later upped to €43 per share in July, increasing the value of the deal from $11.5bn to nearly $12.5bn. The offer was increased after several Qiagen shareholders insisted the firm was worth more than ThermoFisher was offering, due to the increased demand for the kind of diagnostics products Qiagen sells stemming from the Covid-19 pandemic.

Qiagen went on to publish its Q2 results on 4 August. While its sales in the Americas actually fell during the quarter, it saw significant growth in European, Middle Eastern and African regions, as well as in Asia Pacific and other ex-US territories, leading to an overall global revenue rise of 16%.

As well as increasing the offer price, the new agreement reduced the minimum acceptance threshold of Qiagen’s issued and outstanding share capital from 75% to 66.67%. It also specified a $95m expense reimbursement payment from Qiagen to Thermo Fisher if the threshold of the deal was not met.

In the end, only 47.02% of Qiagen shares were tendered by the 10 August deadline, missing the threshold by a fairly significant margin. Qiagen will now pay Thermo Fisher the required reimbursement, and has plans to acquire Covid-19 and flu test developer NeuMoDx.

Shareholder opposition ultimately killed the deal

The opposition to the acquisition among Qiagen’s shareholders was spearheaded by investment firm Davidson Kempner, which in early July owned 3% of Qiagen. The firm published an open letter voicing its objection to the sale and said it would not tender its shares under the initial proposed deal. When Thermo Fisher upped its takeover price, Davidson Kempner proceeded to increase its stake in Qiagen to 8% and said it would still not tender its shares. Davidson Kempner put the standalone share value at Qiagen at €48 to €52 a share, around 18% above Thermo Fisher’s second offer.

As well as Davidson Kempner’s opposition, the deal was objected to by Swiss hedge fund PSquared, which owns over 4% of Qiagen. PSquared likewise said it would not tender its shares even after the improved offer from Thermo Fisher, claiming it undervalued Qiagen’s offering.

Despite the shareholder opposition, the Qiagen board was in full support of the deal. The Financial Times has questioned whether the board can now remain in place, being that it found itself in such significant opposition to its shareholders.

At time of writing, Qiagen’s shares have risen by 24% since the Thermo Fisher acquisition was first announced on 3 March.

Vaccines may be more future-proof than diagnostics

It’s not especially common for a deal of this magnitude to fall apart because the Covid-19 pandemic has improved the fortunes of the companies involved, instead of weakened them. However, despite Qiagen’s significant growth, some analysts have argued that the company’s good fortunes might not last.

While 2021 is likely to see a continued demand for diagnostic products that can be used in Covid-19 testing, analysts from Evercore ISI believe this demand is unlikely to be sustained long-term, reports MedTech Dive.

Themo Fisher’s portfolio of over 200 Covid-19 vaccine and therapeutic candidates may indeed be more future-proof than Qiagen’s offering. While Covid-19 is still a very real threat, with looming fears about a second wave during wintertime, the spread of the disease among the population has been declining over time as a result social distancing and other public health measures. It’s not unreasonable to assume, with many robust diagnostic products for the disease already on the market and case numbers dropping, that the general focus of the medical community will slowly shift from diagnostics to inoculation.