By Neetha Mahadevan
FRANKFURT--German pharmaceutical company Merck KGaA on Monday
said it would acquire U.S. firm Sigma-Aldrich Corp. for $17
billion, as it bids to strengthen its position in the life science
industry.
Merck will acquire all of Sigma-Aldrich for $140 a share in
cash, a 37% premium to Sigma's closing share price on Friday. The
acquisition, the largest in Merck's history, represents "a quantum
leap" for its life sciences business and increases its presence in
North America and Asia, Chief Executive Karl-Ludwig Kley said.
Shares of Merck rose as investors bet the move would make the
company one of the leading players in the $130 billion global life
science industry.
"This looks like a very strategic deal and, at first glance, it
makes a lot of sense--even if the size of the deal is surprising,"
Warburg analyst Ulrich Huwald said, adding that the companies have
complementary segments and the deal will increase Merck's
value.
St. Louis-based Sigma-Aldrich specializes in products used in
scientific research and development in fields from biotechnology to
pharmaceuticals. It also manufactures high-technology materials for
smartphones and TV screens.
Monday's deal is the latest in a string of transactions in the
pharmaceutical industry, which has seen a surge in M&A activity
this year. AbbVie Inc. agreed to pay $54 billion for Shire PLC,
while GlaxoSmithKline PLC and Novartis AG agreed to swap some
businesses in a deal worth more than $20 billion. Last week, Bayer
AG said it would shed its plastics business to focus on life
science, after it bought Merck & Co.'s consumer-product
business for $14.2 billion earlier this year.
Merck KGaA is not affiliated with Merck & Co. of the
U.S.
The Sigma-Aldrich purchase is expected to immediately boost
Merck's adjusted earnings per share and operating profit margin.
Merck expects annual synergies of about EUR260 million, which
should be fully achieved within three years after closing. It also
expects integration costs of about EUR400 million spread over 2015
to 2018.
Merck's divisions include its biopharmaceuticals division, Merck
Serono, consumer health division, high-tech chemicals unit,
Performance Materials, and Merck Millipore. Sigma-Aldrich will
become part of Millipore, which accounts for about 25% of the
company's annual revenue.
Merck has already secured bridge financing for the all-cash deal
and expects it to close midyear 2015, pending regulatory approvals.
The acquisition has been unanimously approved by Sigma-Aldrich's
board of directors and will be presented to Sigma-Aldrich's
shareholders for approval at a special meeting.
Sigma-Aldrich has delivered consistent results in recent years,
with revenue and profit often meeting or exceeding analysts'
expectations. In its most recent period, the company posted $701
million in sales, up 2.9% over the prior-year period, while the
bottom line jumped 12%, driven by growth in the U.S. research
market.
Michael Calia
and
Natalia Drozdiak
contributed to this article.
Write to Neetha Mahadevan at neetha.mahadevan@wsj.com
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