By Randall Osborne

West Coast Editor

To capitalize on massive data gained from completion of the human genome sequence, Invitrogen Corp. said it will purchase Life Technologies Inc. and Dexter Corp. in a deal worth about $1.9 billion.

Invitrogen will pay in cash and stock to acquire all of Life Technologies' outstanding stock, also purchasing Dexter, which owns about 75 percent of Life Technologies' shares. Boards of all three companies have unanimously approved the merger, due to take place in the fall of this year.

The market was less than enthusiastic. Invitrogen's shares (NASDAQ:IVGN) sank 24 percent, closing Monday at $58.37, down $18.75. Invitrogen officials were not available, but Scott Greenstone, an analyst with Thomas Weisel Partners LLC in New York, said the drop was caused by investor anxiety over the size of the acquisition, and Life Technologies' slower growth rate.

"[Invitrogen's] earnings multiple basically got cut in half," Greenstone said. "We thought it would be down, and we thought $60 is about where it would go to eventually, but not right away. This is steeper than we thought."

Invitrogen makes research kits for gene cloning, expression and analysis. Life Technologies, of Rockville, Md., focused on molecular biology and cell culture, brings to the table its own cloning technology, which will be integrated with Invitrogen's capabilities to establish a platform for high-throughput gene discovery.

Together, the companies also aim to develop expression systems, host cell lines and growth media to make cloned proteins for a market estimated at $3 billion. Their customer base is expected to provide a ripe opportunity for the cross sale of molecular biology products and services, too, as well as for specialty materials offered by Windsor Locks, Conn.-based Dexter to the medical field and others.

The result will be a genomics and life sciences firm with more than $500 million in annual revenues, about $100 million in operating cash flow, and a proprietary technology portfolio that includes 200 issued and pending patents, along with 300 licenses.

"[The deal] has the capability of making great sense, but we can't quite see that yet," Greenstone told BioWorld Today.

Invitrogen will pay $62.50 per share, or about $1.5 billion, for all of Dexter's outstanding stock, and $60 per share, or another $400 million, for the outstanding stock of Life Technologies other than the shares owned by Dexter. The maximum cash portion will be about $410 million for Dexter and about $105 million for Life Technologies, or 28 percent of the aggregate merger consideration for each firm.

Early Monday afternoon , Greenstone noted Invitrogen's stock was "right at the collar price [that is, the price set in the deal], so they may have to reset it. But I don't think that's the issue. The issue is that Invitrogen's almost quadrupling its size, and getting a company with a slow growth rate."

Earlier this month, Dexter said it had signed two sales agreements for a total of $675 million - one for its electronic materials, adhesives and polymer systems business, and the other for its nonwoven materials branch. The merger is contingent on closing those deals. Proceeds from the sales, once Dexter's debts are paid, may be used as part of the cash payment in the merger.

Officials said in a conference call that Dexter, which had been the subject of a takeover attempt by International Specialty Products Inc., of Wayne, N.J., is obligated to pay $65 million if Dexter backs out of the merger deal.

"The breakup fee hinders anyone else coming in and making a better offer," Greenstone said. "It helps make sure the deal gets done. It's a fairly common practice."

Lyle Turner, chairman and CEO of Invitrogen, will occupy the same posts in the combined firm.

Last month, Invitrogen acquired Ethrog Biotechnologies Ltd., of Israel, for 200,000 shares of stock. Ethrog developed and patented a fully enclosed system for the electrophoretic separation of macromolecules. Since 1996, Invitrogen had been the privately held firm's marketing partner for gel products used in protein separations. A week earlier, Invitrogen signed a deal with Affymetrix Inc., of Santa Clara, Calif., to develop and market software for microarray analysis. Terms were not disclosed.

In February, Invitrogen said it would offer $150 million in convertible subordinated notes. Priced at $85.20 and due in March 2007, the notes are convertible into shares at any time. (See BioWorld Today, Feb. 28, 2000, p. 1.)

Greenstone said Invitrogen "might have thought [the stock would] take a small hit, and then after investors get the idea, it would come back up."

That's fairly likely to happen, he said. "It depends on how well they execute on this acquisition," he added.

Life Technologies' shares (OTC BB:LTEK) ended the day at $53, up $4, and Dexter (NYSE:DEX) finished at 52.60, up $4.60.