Merck KGaA Records the Largest Acquisition in Their History at $17 Billion (Revised)
Merck KGaA (MKGAF) has agreed to acquire U.S. life sciences company Sigma-Aldrich (SIAL) for $17 billion, or $140 per share in cash. The acquisition represented a massive premium of 37% to SIAL’s Friday closing price of $102.45 per share.
Sigma-Aldrich is trading at about $136.82 per share, up about 33.65% per share.
This record breaking acquisition for Merck KGaA indicates a strong leap toward the life sciences business and an increase in presence in North America and the fast-growing markets in Asia. Merck KGaA will be able to enjoy the 10,000+ products that Sigma-Aldrich offers and a leading e-commerce platform in the industry.
Sigma provides big pharma groups such as Pfizer and Novartis with lab substances such as cell culture substrates. It also makes high-purity inorganic chemicals for the high-tech sector for food and beverage testing products. Sigma says it is the world's largest supplier of biochemicals and organic chemicals to research laboratories and had 2013 sales of $2.7 billion.
The Sigma-Aldrich purchase is expected to have an impact Merck KGaA’s adjusted earnings per share and operating profit margin and expects to see inherent synergies with the acquisition. Sigma-Aldrich, in its most recent period, reported $701 million in sales, up 2.9% over the prior-year period.
“This transaction marks a milestone on our transformation journey aimed at turning our three businesses into sustainable growth platforms,” said Karl-Ludwig Kley, chairman of Merck KGaA’s executive board.
“For our life science business it’s even more than that: 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 KGaA 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,” he added.
Rakesh Sachdev, president and CEO of Sigma-Aldrich, said: “The combined company will be well-positioned to deliver significant customer benefits, including a broader, complementary range of products and capabilities, greater investment in breakthrough innovations, enhanced customer service, and a leading e-commerce and distribution platform in the industry.”
Past Acquisitions
Healthcare companies are having a strong year in acquisitions and deals, with year-to-date activity in the sector topping $380 billion, well over double the year-ago level.
Germany based Merck KGaA’s divisions include its biopharmaceuticals division, Merck Serono, consumer health division, high-tech chemicals unit, performance materials, and Merck Millipore.
Merck KGaA, the largest maker of liquid crystals for TV and computer screens, made lab equipment a major pillar of its business when it purchased U.S. group Millipore for $6 billion in 2010.
Merck KGaA's biggest deal before this one was the takeover of Swiss biotech company Serono, a maker of fertility treatments, for $13.23 billion. Sigma-Aldrich will assume the part of Millipore which accounted for about 25% of the company’s annual revenue.
Outlook
Merck KGaA has secured bridge financing for the all-cash deal and expects it to close midyear 2015. 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.
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(We have revised this article to correct a mistake. The previous version, published yesterday, should not be relied upon.)
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