Merck KGaA to Buy Millipore for About $6 Billion

Merck KGaA agreed to buy Millipore Corp., a supplier of drug development equipment for biotechnology companies, for about $6 billion in cash, beating a rival offer from Thermo Fisher Scientific Inc.

Merck will pay $107 a share, the Darmstadt, Germany-based company said in a statement. The offer is 13 percent more than Millipore’s closing price on Feb. 26, and 50 percent higher than that on Feb. 19, the last day of trading before Bloomberg reported Millipore got a takeover bid.

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After the acquisition, Merck, the world’s largest maker of liquid crystals used to make flat-panel televisions, will get about 35 percent of its revenue from chemicals, up from about 25 percent currently, Merck spokeswoman Phyllis Carter said. Merck will also gain Millipore’s expertise in testing and making biotechnology drugs, said Deutsche Bank analyst Ross Muken.

“The angle for Merck is access to high-growth biologics,” Muken said in a telephone interview. Millipore allows Merck, seller of the cancer drug Erbitux outside the U.S., an opportunity to expand into biotechnology “without the pipeline risk,” said Muken, who has a “hold” rating on Millipore and doesn’t own shares in the company.

Millipore, based in Billerica, Massachusetts, put itself up for sale after getting an unsolicited takeover bid worth less than $95 a share from Thermo Fisher, said people with knowledge of the matter. General Electric Co. is among other companies that weighed a bid during the auction, which was run by Goldman Sachs Group Inc., these people said.

Thermo Fisher

Karen Kirkwood, a spokeswoman for Thermo Fisher, didn’t immediately respond to calls and an e-mail sent outside regular business hours. Kirkwood declined to comment yesterday when asked about the possibility of Thermo Fisher being outbid by another company.

Millipore had long-term debt of $890 million as of Dec. 31. Merck valued its acquisition at about $7.2 billion, including debt. Merck will use available cash and a bridge loan provided by Bank of America Corp., BNP Paribas and Commerzbank AG to finance the acquisition.

“This is a combination with an excellent strategic fit, which will allow us to cover the entire value chain for our pharma and biopharma customers, offering integrated solutions beyond chemicals,” said Karl-Ludwig Kley, chairman of the executive board of Merck, in the statement dated Feb. 28.

Well Positioned

Millipore is well-positioned in the market for researching and producing biotechnology drugs, the companies said in their statement. Merck will also gain Millipore’s comprehensive range of products, technologies and services used by drug companies and universities to improve lab productivity and manufacturing, the companies said.

“Millipore can offer a full work flow for a biotech customer,” Deutsche Bank’s Muken said. “They probably have the widest array of products for that biomanufacturing market of any other players out there.”

Last year, Millipore generated sales of US$ 1.7 billion, with around 6,000 employees in more than 30 countries, according to the statement.

Merck said last year it was seeking acquisitions to bolster its chemicals business as margins from liquid crystals slipped to less than 50 percent. Merck is being advised on Millipore by Guggenheim Securities and Perella Weinberg Partners. Goldman Sachs is Millipore’s financial adviser, the statement said.

Millipore will contribute immediately to core earnings per share and generate cost synergies of about $100 million annually three years after the closing of the deal, Merck’s Carter said.

The announcement “is a validation of the tremendous value of the Millipore brand and a testament to the value this transformation has created for all of our stakeholders,” Martin Madaus, president and CEO of Millipore, said in the statement. “We are excited to join a high-quality company like Merck as we will gain greater scale and scope in the life science industry.”

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