250 laid off in Thermo-Fisher merger

The Thermo Electron-Fisher Scientific merger resulted in the layoff of 250 employees in the new company’s first few months, according to Thermo Fisher Scientific’s most recent quarterly filing with the Securities and Exchange Commission.

This is a small fraction of the roughly 30,000 workers employed by health laboratory and research conglomerate, but those numbers could increase. The severance on those employees cost the company some $3.2 million, but it has set aside some $26 million set aside for severance relating to last year’s mergers, primarily for Waltham, Mass.-based Thermo Electron’s $10.6 billion purchase last November of Hampton, N.H.-based Fisher Scientific.

All told, the company plans to pay $8.3 million for severance and retention “primarily through 2007.” The company said it plans to finalize restructuring plans a year this November. Such actions could include “rationalization of product lines, consolidation of facilities and reductions in staffing levels.”

The restructuring costs in 2007 include plans to consolidate an anatomical pathology operation currently in Pennsylvania with a Fisher site in Michigan.

It’s unclear whether restructuring has or will affect the employees at the former Fisher headquarters in Hampton, which must remain open at least until November 2009, under the merger agreement.

Thermo spokeswoman Lori Gorski said that there had been an unspecified number of “reductions” in Hampton, but that the combined number of employees in New Hampshire has actually increased from 800 to 1,000.

The staff reductions have been primarily in functions where there has been overlap between the two headquarters.

Gorski did not answer questions about possible future reductions in New Hampshire.

Severance is only one component of the $43.8 million in restructuring costs spent thus far. There’s also the cost of shutting down current facilities and relocation expenses (totaling $7.3 million in the first quarter of the year) and some $36.4 million charged to the cost of revenues, related to the sale of Fisher’s inventories that were revalued at the date of acquisitions.

Despite the costs, the company has been performing well since the merger, with some $139 million in earnings, or 31 cents per diluted share, up 3 cents from Thermo’s per-share earnings the previous year.

And in the six months since the merger, the company’s stock price has increase from the low $40 ranger to the low $50 range.

The company’s executives also have made out well with equity-based compensation (both recognized and unrecognized) during the past two years, totaling nearly $95 million.

Much of that compensation went to former Fisher executives who have stepped down as a result of the merger. None of the company’s top executives and only three out of eight board members are from Fisher, even though Fisher was twice the size of the acquiring Thermo.

There are some risks associated with the merger, however. The company pointed out that its includes some $8.58 billion of “good will” that could evaporate if earnings fall. The company also has some $2.35 billion in indebtedness, which could pose a problem if the company, or the economy, takes a tumble. – BOB SANDERS

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