Shares of Life Technologies Inc., a Rockville biotechnology company caught in the crossfire of a hostile takeover attempt, surged yesterday to a yearly high when a new player, Invitrogen Corp., agreed to buy it and its majority owner, Dexter Corp., for $1.9 billion.
It was much-awaited relief in the seven-month battle during which investors largely ignored the long-profitable Life Tech because of wrangling between Dexter Corp. and International Specialty Products Inc. Dexter owns 75 percent of Life Tech.
International Specialty, a Wayne, N.J., company that owned 10 percent of Dexter and 14 percent of Life Tech, had offered a bid of $45 per share for Dexter last month. Dexter, a specialty materials supplier based in Windsor Locks, Conn., repeatedly rebuffed the offer, and announced the sale of two manufacturing units to thwart the takeover attempt.
Invitrogen, based in Carlsbad, Calif., is known for its research kits to improve gene analysis and cloning. It has key synergies with Life Tech, whose products include cell culture and molecular biology products that could fit well into Invitrogen's kits.
Under the terms of the deal, Invitrogen will acquire the outstanding Dexter stock for $62.50 a share, or about $1.5 billion. Invitrogen will acquire all Life Tech shares not owned by Dexter for $60 a share, or $400 million.
The boards of Invitrogen, Dexter and Life Tech approved the transactions. The agreement includes a $65 million break-up fee should Dexter back out.
Invitrogen shareholders worried that the deal would be a drag on the company's growth. Invitrogen's stock tumbled $18.75 to close at $58.375.
But investors apparently liked the deal for Dexter and Life Tech. Dexter closed at $52.1250, up $4.6016. Life Tech, after soaring to a 52-week high of $57.75 in early trading, ended the day at $53, up $4.
"I think this is a white-knight kind of thing," said Winton Gibbons, a genomics analyst at William Blair & Co. in Chicago.
In sales alone, the acquisition swells Invitrogen to more than four times its size. Life Tech's first-quarter revenue this year was $109.3 million compared with Invitrogen's $27.3 million. But Invitrogen's sales are growing at least twice as fast as Life Tech's, Gibbons said. Already this year, Invitrogen has acquired two other biotechnology companies, Research Genetics Inc., of Huntsville, Ala., and Ethrog Biotechnologies Ltd., an Israeli company.
"They have shown us they can do it," Gibbons said of Invitrogen's ability to manage and integrate acquisitions.
Gibbons is far less excited about Dexter, founded in 1767 and the oldest company on the New York Stock Exchange. Besides its life sciences component, businesses include packaging materials for food and medical supplies and specialty adhesives for the aerospace and electronics markets.
"Invitrogen was buying Life Technologies," Gibbons said. "It just had to buy Dexter to get it."
International Specialty's role in the deal smacks of irony to those who have followed Dexter and Life Tech's acrimonious history. Two years ago, Dexter owned 52 percent of Life Tech, and attempted to take control with a $37-per-share offer. Two Life Tech directors resigned in protest. In late 1998, Dexter took a slightly higher offer directly to shareholders, upping its stake to 71 percent. Some shareholders perceived it as a bad deal.
"Dexter squeezed me out," said George F. Shipp, who followed Life Tech for 10 years as a health care analyst with Scott & Stringfellow in Norfolk, Va., and now is a senior vice president there.
"The real story here is that, if Dexter hadn't been in the way, Life Tech shareholders could have gotten more than 60 bucks" back in 1998.
Shipp added that he and his investors made money on the deal. But he could see that, as the biotechnology industry burgeoned and demand for Life Tech's products soared, the company's value would grow.
Life Tech is an anomaly in the high-flying biotech world. It actually makes products (10,000 of them) and profit (net income of $11 million in the first quarter).
"People have been trying to get at Life Tech for two or three years now," Shipp said. "Looks like Invitrogen is going to wind up with the prize."