Bio-Rad Laboratories Inc. (BIO:US), a maker of medical screening and research equipment, rose the most in more than three years on speculation the family-run company may be open to a sale after the death of its founder.
Bio-Rad jumped (BIO:US) 11 percent to $114.25 in New York, its biggest percentage gain since November 2008. It has a market value of about $3.2 billion.
Chairman David Schwartz, who founded Bio-Rad in 1952, died April 1 at age 88, the Hercules, California-based company said in a statement. Schwartz was considered by investors to be opposed to selling the company, Junaid Husain, an analyst at Dougherty & Co. in Minneapolis, said by telephone.
“The prevailing wisdom is that the day David Schwartz passes away is the day this company is in play,” said Husain, who has a “buy” rating and doesn’t own the stock.
Bio-Rad had $2.1 billion in 2011 sales, according to data compiled by Bloomberg. Treasurer Ron Hutton said in a telephone interview that the company isn’t for sale.
“Mr. Schwartz, before he passed, and his family have always averred that the company would remain independent and the family would continue their involvement for as long as they certainly can,” Hutton said. “I don’t see anything, with David’s passing, that has changed that.”
Long-term investors probably would prefer the company stay in the family’s hands, according to Jeff Matthews, a founder of Ram Partners in Greenwich, Connecticut, who said he has owned Bio-Rad shares for about 12 years.
“It’s got a great culture and it’s got great long-term potential,” Matthews said by telephone. “Investors have benefited immensely from the way the company was run as-is.”
Matthews invested in Bio-Rad after he saw the company mentioned in a news article as one of the only producers of a test for Bovine Spongiform Encephalopathy, commonly known as mad-cow disease.
During a meeting with Schwartz after a scare on the disease in the U.S., the Bio-Rad founder recognized both the promise and limitations of his product, Matthews recalled.
“He said, ‘Look, this a one-shot thing. This is not going to be sustainable. Yeah, we’re going to see orders now and it’ll be good for a couple years, but then it’ll tail off,’” Matthews recalled. “What he was saying was, we’re going to use this cash. We’ve got a window, we have a good opportunity and then we’re going to use this cash to invest in other business opportunities when they come along.”
Hutton confirmed the company’s success selling BSE tests.
“I think sales peaked in the low hundred million dollar range,” he said. “At the time, it was a very strong business for us. Like the rest of our products, we were able to put the money back into our business.”
The Schwartz family controls a majority of the voting shares of the company, making a hostile takeover difficult, said Alastair Mackay of GARP Research & Securities Co. in Baltimore.
Schwartz was the largest shareholder in the company as of December, according to data (BIO:US) compiled by Bloomberg. His wife, Alice Schwartz, sits on the board (BIO:US), and his son Norman is president and chief executive officer.
Norman Schwartz, who took over as CEO in 2003, is considered more amenable to a deal than his father, Husain said. The company is well managed and could be an acquisition target for other life sciences companies such as Life Technologies Corp. (LIFE:US), Husain said.
“It’s a very nice business,” he said.
Matthews, though, said that he’d “be more surprised if they sold than I would if they said we’re not interested in selling.”
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