Thermo Fisher will pay $4.2 billion for FEI, a roughly 14% premium from FEI's close Thursday. This purchase price is too high, according to Jim Cramer.
"The deal price right now is too high" for FEI, said Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns Thermo Fisher. He does not anticipate another bidder will attempt to acquire FEI for an even higher premium.
Despite the large price tag, Cramer believes the acquisition is a smart one.
"It's very additive immediately," he noted. Thermo Fisher said the deal will contribute about 30 cents per share to its adjusted earnings per share in the first full year after the deal clothes. In the three years after the close, Thermo Fisher expects the deal to extract about $55 million in annual costs and gain about $25 million of adjusted operating income benefits.
"It's terrific in complementarity to Thermo Fisher," he noted. This was echoed by analysts at Leerink Partners LLC, who said in a Friday note that the deal was a "logical" one because "electron microscopy represented a gap in Thermo's scientific instruments offering."
Thermo Fisher CEO Marc Casper said on an analyst call that FEI will join Thermo Fisher's analytical instruments segment, which includes its mass spectrometry, chromatography and chemical analysis businesses.
"Not only is FEI's electron microscopy portfolio highly complementary to these technologies, but we will also be able to leverage our total company global commercial reach to put FEI's products into the hands of more customers," Casper said.
Other benefits, Casper said, include an increased market share in the life sciences industry and "significantly expand[ed] offerings into attractive material science markets."
The deal is expected to close in early 2017.
"Stay long TMO, sell FEI," Cramer added.