Millipore, which has a market capitalization of about $4 billion, makes filters and purifiers for laboratory water and other materials used in making biotechnology drugs. The company has hired Goldman Sachs Group as its financial advisor after receiving the bid, the source said.
The news, initially reported by Bloomberg, sent Millipore shares soaring as much as 36 percent on Monday to an all-time high, while Thermo shares were off about 3 percent. Bloomberg also reported that the deal could be done as early as next week, citing a person familiar with the situation.
The deal would be the first major transaction for new Thermo Chief Executive Marc Casper, who recently took over from longtime CEO Marijn Dekkers after Dekkers agreed to helm German drugmaker Bayer AG .
Dan Leonard, an analyst with First Analysis Securities Corp, said more than half of Millipore's business involves products used in the drug manufacturing process, particularly in biotechnology medicines, of which Thermo has a relatively small presence.
For Thermo this would be instant scale in an attractive growth area within the industry, which is biotech drug manufacturing, and it would be instant scale in an area where they are currently undersized, Leonard said.
Earlier this month, Millipore posted a better-than-expected quarterly profit, helped by strong demand from the company's biotechnology customers and higher levels of vaccine production.
But Thermo could find competition for Millipore, Leonard said.
For some time I've thought that the two homes for Millipore could be Thermo Fisher and General Electric , Leonard said, noting that GE has a large life sciences tools business as well.
So if they've hired Goldman, I imagine Goldman is on the phone with GE right now asking if they are interested.
Thermo's largest past transaction was the acquisition of Fisher Scientific International by Thermo Electron, as it was previously called, to create the world's largest scientific instrument maker.
Last month on Casper's watch, Thermo agreed to acquire analytical instruments maker Ahura Scientific for $145 million, but an acquisition the size of Millipore would firmly put his stamp on the company.
Thermo spokeswoman Karen Kirkwood declined to comment on reports of the bid for Millipore, calling it a rumor. Millipore did not immediately return calls seeking comment. Both companies are based in Massachusetts.
Millipore shares rose $15.41, or 21.5 percent, to $86.75 in late-afternoon trade on the New York Stock Exchange, after climbing as high as $97.58 earlier. Thermo Fisher shares were off $1.44, or 2.9 percent at $47.78 on the NYSE.
We generally would view a purchase of Millipore by Thermo as a major positive, Deutsche Bank research analyst Ross Muken said in a report. We think the combination ... makes both financial and strategic sense.
(Reporting by Jessica Hall; additional reporting by Bill Berkrot in New York; Editing by Gerald E. McCormick and Richard Chang)