UK regulators get tough on instrument mergers

Questions raised by UK regulators recently scuttled one scientific instrument merger and now may lead to trouble for another. The actions anticipate what may be a more active role for UK regulators overseeing international mergers after the UK leaves the European Union.

In the most recent instance, the UK’s Competition and Markets Authority (CMA) determined that Illumina’s pending $1.2 billion purchase of DNA-sequencing-systems competitor Pacific Biosciences (PacBio) “could result in more expensive or lower quality products and less innovation in the market.” The CMA threatened to begin an in-depth investigation “if the merging businesses are unable to address the CMA’s concerns.”

Both Illumina and PacBio supply instruments that scientists use during disease research and drug development to study genetic variations. Were the two to merge, customers would have “limited alternatives available” for advanced sequencing technology, the CMA says.

In December, the CMA questioned another instrumentation deal: Thermo Fisher Scientific’s $925 million purchase of electron microscopy supplies maker Gatan from parent Roper Technologies. In that case, the CMA said, marrying the two companies could lead to higher prices or lower quality for British electron microscope users. The two instrument firms called the deal off on June 10.

Illumina and PacBio are far from calling their deal off at this point. Illumina issued a statement saying it expects the CMA will begin the in-depth review, with which both instrument makers will cooperate. Illumina expects to close the deal by the end of this year instead of the middle.

The CMA’s attention to the instrumentation mergers may presage an era when British regulators insist on reviewing large international mergers instead of taking an advisory role, as they do now. According to a memorandum issued earlier this year by the law firm Skadden, Arps, Slate, Meagher & Flom, UK officials are considering such a requirement, meaning that firms will have to file for review with both British and European Union regulators. Such a scenario “will significantly increase” regulatory burdens and approval timetables, the law firm says.