ARORA AMBASSADOR CLUB

Buyout Rumors

There are rumors that ThermoFisher (TMO) is preparing to make a buyout bid for Illumina (ILMN).  There is credibility to the rumor for the following reasons:

     • ILMNis a very good strategic fit for TMO.

     • TMO is a very acquisitive company.  TMO has grown by acquiring a large number of companies.

     • Right now, ILMN price is depressed.  Buyers like to pounce and buy good companies when their stock price is depressed.

Bidding War

If TMO does make an offer for ILMN, there is a high probability of a bidding war.  In a bidding war, the stock price can go much higher than you would think.

Europe Setback

ILMN has received a major setback in Europe.  Europe does not want to allow ILMN to hold on to Grail.

Common Sense

Grail has no sales in Europe.  For this reason, ILMN has been arguing that Europe does not have jurisdiction.  Authorities in Europe disagree.

United States

The decision in Europe will negatively impact the stance of the US government about Grail.

The Reason Is Gone

ILMN is the leader in gene sequencing and is a very good company.  However, the reason to buy ILMN was not its gene sequencing business but its subsidiary Grail.  Grail has developed a blood test to detect cancers.

Cancer Detection

Cancer detection using blood tests is a promising area for investments.  Most of the companies in this business are private.  However, there are public companies that are working on cancer detection through blood tests.  An example is EXAS.

The Plan

The plan is to give buy signals on one or more cancer detection companies when market conditions settle down.

Buy Zone

In view of the development in Europe, the buy zone on ILMN has been suspended.

What To Do Now

Those not in ILMN may consider not buying at this time.

In view of buyout rumors, those holding a small quantity of ILMN as a part of a diversified portfolio may consider continuing to hold and potentially reduce position size if the stock moves up to $211 – $237 and, if at that time, there is no progress or rumors of a buyout.