Germany's Merck to buy Sigma-Aldrich for $17 billion to boost lab supplies operation

Mon Sep 22, 2014 12:56pm EDT
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By Ludwig Burger

FRANKFURT (Reuters) - Drugs and chemicals maker Merck KGaA (MRCG.DE: Quote) agreed on Monday to acquire U.S.-based Sigma-Aldrich Corp SIAL.O for $17 billion in cash to boost its lab supplies business, the biggest takeover in the German group's history.

The deal helps Merck, 70 percent controlled by the descendants of its 17th century founder, to focus more on supplying drugmakers and academic institutions with chemicals and services, seen as offering a steadier income stream than drug development.

"With this acquisition we have the opportunity to turn one of our most reliable businesses into a core earnings contributor," said finance chief Marcus Kuhnert.

Merck, which has been hit by several drug development failures, said it was happy for its own pharmaceuticals business to remain a medium-sized entity.

The deal was approved by Sigma-Aldrich's management but still needs acceptance from more than 50 percent of the target's shareholders.

Merck said it will acquire Sigma-Aldrich shares for $140 apiece, a 36 percent premium over the one-month average closing price and a 37 percent more than the latest closing price of $102.37 on Friday, Sept. 19.

St Louis, Missouri-based Sigma had 2013 sales of $2.7 billion and provides big pharma groups including Pfizer Inc (PFE.N: Quote) and Novartis AG NOVN.VS with lab substances such as cell culture substrates. It also makes chemicals for the technology sector and food testing products.

The combined lab supplies business would gain more exposure in North America and Asia, taking on global players such as Thermo Fisher Scientific Inc (TMO.N: Quote). The deal would immediately top-up adjusted earnings per share.   Continued...

A branch of drugs and chemicals group Merck is pictured in central German city of Darmstadt March 7, 2012.