Phil Serafino Paris
MERCK has agreed to buy Sigma-Aldrich for $17 billion (R188bn) in cash to expand in chemicals used in research laboratories and drug making.
The German drug and chemical company would pay $140 a share, 37 percent more than Sigma-Aldrich’s closing price on September 19, Merck said yesterday. US-based Sigma-Aldrich would add to Merck’s earnings immediately, according to the statement.
Merck’s shares in Frankfurt jumped as much as 9.4 percent – the most in almost six years. They were up 6.3 percent at e73.98 (R1 041) at 2pm, giving the company a market value of e32.2bn.
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, a US maker of laboratory equipment and chemicals, in 2010 for about $6bn.
Merck acquired Serono in 2007, yet has not had a major new drug approved since 2003.
“They seem to be backing away from drug development, which they haven’t been successful in for the last few years,” said Asthika Goonewardene, an analyst with Bloomberg Intelligence.
Merck, a family-controlled company founded in 1668, got 58 percent of its revenue from pharmaceuticals last year, while chemicals accounted for 39 percent.
The company makes liquid crystals used in flat-screen televisions in addition to lab equipment and chemicals.
“This transaction marks a milestone on our transformation journey aimed at turning our three businesses into sustainable growth platforms,” Karl-Ludwig Kley, Merck’s chief executive, said. The acquisition would allow the company to provide a broader range of products, he said.
Merck, which makes the Erbitux cancer medicine, promoted Stefan Oschmann, the head of the pharmaceutical unit, to deputy chief executive last week. It named Belen Garijo, the chief executive of the Merck Serono biopharmaceutical division, to its board as head of pharmaceuticals.
Sigma-Aldrich shareholders would vote on the transaction at a special meeting, and the deal was expected to close in the middle of next year, Merck said.
The purchase values Sigma-Aldrich, excluding net debt, at about 19.9 times earnings before interest, tax, depreciation and amortisation for the past 12 months, compared with a median multiple of 9.5 times in speciality chemicals acquisitions of $100 million or more in the past five years, according to data compiled by Bloomberg.
The purchase eclipses the 2007 purchase of Serono, which was valued at about $13.5bn at the time, as the largest by Merck.
The deal would allow Merck to better serve its Millipore clients, Ulrich Huwald, an analyst at Warburg Research in Hamburg, said. “I’m quite surprised,” he said. “I would have expected some smaller deals.” – Bloomberg