Dive Brief:

• Thermo Fisher Scientific announced Thursday its bid to acquire molecular diagnostics company Qiagen has failed and the planned deal is terminated. As a result, Qiagen will pay Thermo Fisher $95 million in expense reimbursement.
• Thermo Fisher had offered 43 euros per Qiagen share, up from its original March offer of 39 euros. For the deal to go through, two-thirds of Qiagen shareholders had to tender their shares by Aug. 10. Thermo Fisher disclosed Thursday that only 47.02% of Qiagen shares were tendered, thus missing the required threshold.
• The deal had been on track as the largest in medtech this year, until Siemens Healthineers announced plans two weeks ago to acquire radiation oncology specialist Varian Medical Systems for approximately $16.4 billion, and digital health platform Livongo was snapped up by Teladoc last week for $18.5 billion.

Dive Insight:

The initially-valued $11.5 billion deal was made public the week before the World Health Organization declared the novel coronavirus a pandemic, setting off a test and supplies boom for both companies.  

But it was disputed by shareholders who argued Qiagen was worth more, leading Thermo Fisher to raise its offer, to no avail.

SVB Leerink analysts in a Thursday note said they see "limited to no downside" for Thermo Fisher given its diversification and a predicted continued benefit from COVID-19 testing. They also noted the company has more than 200 coronavirus vaccine and therapeutic projects in the works. 

But Evercore ISI analysts argued Thermo Fisher's vaccine revenues are more sustainable than diagnostics. While fiscal year 2021 is "likely to see some continued benefit from testing" it is unlikely to sustain over the long term, they wrote.

Going forward, CEO Theirry Bernard said Qiagen will proceed with plans for the full acquisition of COVID-19 and flu test developer NeuMoDx.

Qiagen on August 4 published second quarter results showing soaring demand in Asia Pacific and other ex-U.S. territories driving sales growth during the pandemic. While sales in the Americas fell in the quarter, double-digit growth in the Europe, Middle East and Africa region and Asia Pacific offset the decline in the Americas, causing global revenue to rise 16%.

The genesis of the deal dates back to October, when Qiagen received three expressions of interest in a takeover in the wake of a clutch of announcements that sent its stock down 20%. Two more companies entered the running to buy Qiagen in November. Negotiations dragged on into the new year, with multiple parties discussing non-binding bids of between $36 and $44 a share.

Qiagen pushed for $46 a share as negotiations with Thermo Fisher entered the endgame but settled for a bid that worked out at just below $43 at the then-current exchange rate.

At the time, Thermo Fisher expressed confidence in its ability to close the takeover. However, the COVID-19 crisis moved up a gear shortly after Thermo Fisher reached the agreement to buy Qiagen, leading investors to reassess the value of the European company.

Last month, institutional investor Davidson Kempner argued Thermo Fisher’s original offer “severely” undervalued Qiagen. The investor, which owned 3% of Qiagen at the time, said “COVID-19 has a material long-term impact on the diagnostics industry, and that these trends are going to be a significant driver for the Company's prospects and fundamental value over the short and long term.”

The hedge fund claimed victory on Thursday. "The low acceptance level of 47.02% is a clear signal that there is widespread confidence in the long-term prospects of Qiagen." 

Davidson Kempner posted its first letter seeking a higher bid on July 10. By then, Qiagen was already discussing whether to start negotiations with Thermo Fisher over an improved offer. Qiagen sent a letter to Thermo Fisher asking to restart negotiations in light of COVID-19 on July 9.

Within a week, Thermo Fisher and Qiagen had agreed to a 10% increase in the offer and a reduction in the minimum acceptance threshold from 75% to 67%. The threshold determines the percentage of Qiagen shares that needed to have been validly tendered by the close of the offer period.

The revised deal failed to quell Davidson Kempner’s opposition to the takeover. Early this month, it increased its stake in Qiagen to 8% and said it would not tender its shares under the revised offer. Davidson Kempner put the standalone fair value of Qiagen as high as 52 euros ($61) a share, around 18% above Thermo Fisher’s improved offer.

This story has been updated with analyst and executive comments.