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Exclusive: Thermo emerges as frontrunner for Life Tech -sources

By Greg Roumeliotis and Soyoung Kim

NEW YORK (Reuters) - Thermo Fisher Scientific Inc is emerging as the lead contender in an auction for Life Technologies Corp , a genetic testing maker with a market value of more than $11 billion, three people familiar with the matter said this week.

Thermo Fisher, the world's largest maker of laboratory equipment, is considering a bid of $65 to $70 per share for Life Tech and is interested in buying the entire company, two of the people said.

It can squeeze more cost savings than buyout firms can and is expected to have a leg up on private equity bidders, which do not believe they can still achieve desired returns at that price range, the three people said. Thermo also has an advantage over rival trade buyers, which may not want all of Life Tech or have not been as aggressive in their pursuit of the company so far, the sources said.

Bids are due next week and it is still too early to tell the outcome of the auction, all three sources said, asking not to be named because the matter is confidential.

Shares of Life Tech rose 1.8 percent to close at $65.75 on Tuesday, giving the company a market value of $11.2 billion. Thermo Fisher, whose shares rose 4 percent to $78.56, had a market cap of roughly $28 billion.

Carlsbad, California-based Life Tech, which has hired advisers to explore a sale, has also attracted interest from Danaher Corp , Roche Holdings AG and private equity firms, people familiar with the matter told Reuters previously.

A buyout consortium of Blackstone Group LP , Carlyle Group LP and Singapore's state investor, Temasek Holdings, remains in the process, but it is not expected to outbid Thermo, several people familiar with the matter said this week.

They said KKR & Co LP briefly teamed up with Hellman & Friedman LLC to pursue a deal but is not expected to bid anymore. The position of Hellman & Friedman in the deal could not be learned.

Life Tech, Thermo Fisher, Roche, KKR, Blackstone and Carlyle declined to comment, while Danaher and Hellman & Friedman did not respond to requests for comment.

DEAL SEEN BOOSTING EARNINGS

If Thermo Fisher wins the auction, it would boost its presence in scientific research, genetic analysis and applied sciences and make it a major player in the genetic sequencing market. It would also create a healthcare technology giant with annual revenues of over $16 billion and some 50,000 employees.

But depending on the final price, a deal could also stretch it financially.

At a range of $65 to $70 per share for Life Tech, Thermo Fisher believes the deal would add to its earnings, two of the people said.

Life Tech, however, may seek more than $70 per share, based on the view that potential synergies Thermo would be able to extract would make a deal accretive even at that price, the third source said.

Shares of Life Tech, which makes genetic testing equipment and products used in biotechnology development, have run up in expectation of a deal. They are trading at around $65, up 32 percent year to date, outperforming a 9.5 percent rise in the Standard & Poor's 500 Index <.INX> over the same period. Thermo shares have risen more than 18 percent.

Life Tech is already trading in line with its peers, at about 9 times its earnings before interest, tax, depreciation and amortization (EBITDA).

Meanwhile, with its net debt equivalent to 2.4 times its EBITDA, Thermo Fisher's leverage is higher than the median of its peers, 1.6 times, according to Thomson Reuters data.

This could inform Thermo Fisher's decision on whether to fund its bid just with cash or also issue new equity.

Life Tech said on January 18 it had hired Deutsche Bank and Moelis & Co to assist in its "annual strategic review," opening the door to a possible sale.

(Reporting by Greg Roumeliotis, Soyoung Kim and Paritosh Bansal in New York; Editing by Bernard Orr, Steve Orlofsky and Richard Chang)

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