Date: September 22, 2014:
Merck KGaA said it has entered into a definitive agreement to acquire Sigma-Aldrich for $17 billion.
Merck agreed to buy Sigma-Aldrich for $17 billion to expand in chemicals used in research labs and pharmaceutical manufacturing and reduce its dependence on drug development (in 2013, 58% of Merck’s revenue came from pharmaceuticals, while chemicals accounted for 39%).
Merck is to pay $140 per share in cash, a 37% premium to the closing price on 19 September and a 36% premium to the one-month average closing price.
The deal is expected to close in mid-2015, subject to regulatory approvals and other customary closing conditions.
According to Morgan Stanley, the deal boosts Merck's pro-forma 2013 sales by ~19% and EBITDA pre by ~24%.
Highlight transaction multiples is close to life science peers, at 19.4x EV/EBITDA 2014e excluding synergies and 13.9x including synergies.
The purchase will accelerate Merck’s shift away from developing pharmaceuticals at a time when its Serono biotechnology business has struggled to create new products.
The company acquired Millipore Corp., a U.S. maker of lab equipment and chemicals, in 2010 for about $6 billion, and bought AZ Electronic Materials SA, a chemical supplier to the electronics industry, this year for about $2.5 billion.
Karl-Ludwig Kley, Chairman of Merck’s Executive Board said: “For our life science business […] it’s a quantum leap.
In one of the world’s key industries two companies that fit perfectly together have found each other to present a much broader product offering to our global customers in research, pharma and biopharma manufacturing, and diagnostic and testing labs.
As such, the combination of Merck and Sigma-Aldrich will secure stable growth and profitability in an industry that is driven by trends such as the globalization of research and manufacturing.
The combination gives us the possibility to invest even more in innovation going forward. We are delighted to make this compelling proposition to Sigma-Aldrich’s shareholders, who will obtain full and certain cash value for their shares.”
Bridge financing has been secured for the all-cash transaction, and Merck expects the final financing structure will combine cash on Merck’s balance sheet, bank loans, and bonds.
In May 2014, Merck has agreed to sell its consumer care business to Bayer for $14,2 Bn (the cash will finance the Sigma-Aldrich acquisition).
In link with this purchase, Bayer announced few days ago the separation of its MaterialScience business (evaluated to €9 Bn) to finance the Merck’s Consumer Care business acquisition.
Bayer to float Bayer MaterialScience on the stock exchange as an independent company
Sources: Solvay Strategy Team from Chemweek, Morgan Stanley, Bloomberg.