After disappointing investors on Feb. 23 with a lackluster set of 2009 financial results, Germany's Merck KGaA a week later turned sentiment around with a €5.3 billion ($7.2 billion) agreement to acquire Millipore, which is based in Billerica, Mass.
Millipore, a technology, tools and service provider to the biopharma industry, is expected to strengthen Merck's own laboratory and manufacturing services business and will add about $1.7 billion in sales to Merck KGaA's €1.2 billion chemicals arm. Before the deal, that division accounted for 25 percent of Merck's overall revenues; its share will now increase to 35 percent.
The acquisition may also help in providing manufacturing expertise for Merck's efforts in the biotech arena, where the therapeutic cancer vaccine, Stimuvax , is in Phase III clinical trials, and the recombinant protein, atacicept, is in Phase II/III trials for autoimmune disease.
Reflecting the wider appeal of the business, Millipore had apparently attracted bids from a number of suitors, including Thermo Fisher Scientific.
Merck's share price rose by just over 2 percent on the day the deal was announced.
Not all analysts had been expecting Merck to do a non-pharma deal - particularly since it was the non-pharma business divisions - life science chemicals and liquid crystals - that had a poor 2009, dragging down overall revenues.
Merck chief executive Dr. Karl-Ludwig Kley said the acquisition would "balance Merck's business portfolio," under its diversification strategy. But there is also a sense that the acquisition was too good an opportunity to miss. Kley said that the company was looking at a number of opportunities in both the pharmaceuticals and the chemicals sector.
The acquisition will strengthen business in the US, another overriding goal for the group, and will immediately be accretive to core earnings per share, Kley said. The deal will broaden the company's footprint in laboratories, and allow it to cover the entire value chain for its pharma and biopharma customers, he added.
Merck Chemicals manufactures specialty chemicals and develops synthetic processes and new formulations, while Millipore markets cell culture, chromatography media, filtration devices, customized antibodies and laboratory water system products. The expanded chemicals division will be more vertically integrated, executives said, with services that include synthesis, formulation as well as bioprocessing and manufacturing.
The company expects annual synergies of €75 million from the deal, mainly from consolidating its U.S. chemical headquarters at Millipore's headquarters in Billerica. It says it intends to retain senior management and to expand Millipore's workforce.
Merck is offering $107 in cash for each Millipore share, 13 percent more than Millipore's closing price last week. The offer has been approved by the boards of both companies, and the acquisition is expected to close in the second half of this year, after approval from Millipore shareholders and regulators.
The acquisition will be funded by cash and a term loan provided by Bank of America Merrill Lynch, BNP Paribas and Commerzbank, with Merck KGaA saying that it will issue bonds to partly repay the loan. The company had €2 billion in cash and marketable securities at the end of the year.
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- John Davis (3 j.davis@elsevier.com)
