Merck will acquire all of the outstanding shares of Sigma-Aldrich for $140 per share in cash. The agreed price represents a 37% premium to the latest closing price of $102.37 on Sept. 19, 2014, and a 36% premium to the one-month average closing price. The transaction is expected to be immediately accretive to Merck’s EPS pre and EBITDA margin. Merck expects to achieve annual synergies of approximately €260 million (approximately $340 million), which should be fully realized within three years after closing.
“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’s Executive Board.
“For our life science business it’s even more than that: it’s a quantum leap,” Kley added. “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. What’s more, 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.”
“We are excited to join forces with Merck, a distinguished industry leader,” 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. This transaction is a clear validation of our success in transforming Sigma-Aldrich into a customer-focused and solutions-oriented global organization. This is a testament to the strength of the Sigma-Aldrich brand and the accomplishments of our 9,000 employees worldwide. We believe this is a very positive outcome for our shareholders, who will receive a significant premium, and our employees, who will benefit from enhanced opportunities as part of a larger, more global organization.”
The combined company will be able to serve life science customers around the world with a highly attractive set of established brands and an efficient supply chain that can support the delivery of more than 300,000 products. In the Laboratory & Academia business, together Merck Millipore and Sigma-Aldrich will offer their customers a complementary range of products across laboratory chemicals, biologics and reagents. In pharma and biopharma production, Sigma-Aldrich will complement Merck Millipore’s existing products and capabilities with additions along the entire value chain of drug production and validation.
Merck plans to maintain a significant presence in St. Louis, and in Billerica, following completion of the transaction, as well as in important Merck Millipore sites such as Darmstadt and Molsheim, France. An integration team, which will include representatives from both companies, will be established to oversee and facilitate the integration process.
The combined life science business will have solid growth potential, strong and sustainable cash flow, and meaningful efficiency potential on an operational level. Based on fiscal year 2013 financials, the business would have had combined sales of €4.7 billion ($6.1 billion), an increase of 79% and combined EBITDA pre (earnings before interest, taxes, depreciation and amortization before one-time items) of €1.5 billion ($2.0 billion), which is an increase of 139%. Merck Group’s sales would have increased by approximately 19%. For the same period, the acquisition would have increased Merck Group’s EBITDA pre by approximately 24% and improved Group EBITDA pre margin from approximately 30% to approximately 33% including expected synergies.
The transaction has been unanimously approved by Sigma-Aldrich’s Board of Directors. A merger agreement will be presented to Sigma-Aldrich shareholders for approval at a special meeting of shareholders. The transaction has the full support of Merck’s Executive Board and E. Merck KG including its Board of Partners, and a Merck shareholder vote will not be required. Bridge financing has been secured for the all-cash transaction, and Merck expects the final financing structure will comprise a combination of cash on Merck’s balance sheet, bank loans and bonds. Closing is expected in mid-year 2015, subject to regulatory approvals and other customary closing conditions.