Virus testing M&A fails smell test

Surging demand for COVID-19 tests is awakening animal spirits. That may explain why US diagnostic firm Quidel is eyeing a potential $12.8 billion combination with German peer Qiagen, according to a Bloomberg report.

The two businesses are not obvious bedfellows. The $10 billion Quidel specialises in infectious diseases diagnostics while Qiagen mainly makes genetic testing kits, meaning few synergies.

Given the two companies’ similar sizes, a merger of equals looks likely. But Qiagen shareholders, led by hedge fund Davidson Kempner, only last year rejected Thermo Fisher Scientific’s cash offer, which was close to the current share price. They may also be wary of ending up shareholders in a more cumbersome, complex group.

However, Quidel’s share price has nearly trebled since the pandemic started, as demand for its kits has caused revenue to soar.

Chief Executive Douglas Bryant may struggle to pull this deal off, but he can’t be faulted for looking to make the most of such a rich acquisition currency.