Merck KGaA to Buy Millipore for $7.2B

Merck KGaA has entered into a definitive agreement to acquire Millipore for $7.2 million in a cash deal that would create a life science research products giant with around $2.9 billion in annual revenues.

The firms announced the deal yesterday — several days after reports that Thermo Fisher Scientific had made a $6 billion bid for Millipore.

Under terms of the deal, Darmstadt, Germany's Merck will pay $107 per share for all of Millipore's stock for a total transaction value of roughly $7.2 billion. The deal values Millipore at 4.4 times its 2009 sales of $1.65 billion.

"By combining Millipore's bioscience and bioprocess knowledge with our own expertise in serving pharma customers, we will be able to unlock value in our chemicals business and transform it into a strong growth driver for Merck," Karl-Ludwig Kley, chairman of the executive board of Merck KGaA. "Through this acquisition, we will expand the overall product offering of the Merck Group, using the well-recognized Millipore brand in addition to our own brand."

Merck said that its chemicals business currently generates around 25 percent of its total revenues, but following the acquisition that will increase to 35 percent of total group revenues. Merck, which also has a large pharmaceuticals business, expects the combined business will generate annual cost synergies of around $100 million within three years of the closing of the deal.

Millipore's headquarters will remain in Billerica, Mass., the firms said, and will be combined with Merck's US chemicals headquarters. In addition, Merck said that it intends to "build on Millipore's talented workforce and intends to retain its senior management."

Merck will fund the acquisition with available cash and a term loan provided by Bank of America Merrill Lynch, BNP Paribas, and Commerzbank Aktiengesellschaft. It plans to replace part of the facility through the issuance of bonds.

The boards of directors of both firms have approved the transaction, which will require the approval of Millipore's shareholders. The firms expect to complete the deal in the second half of 2010.

In a research note issued on Monday morning, Thomas Weisel analyst Peter Lawson said that the Merck-Millipore deal "refocuses attention on the potential of industry consolidation."

In early Monday trade on the New York Stock Exchange, shares of Millipore were up 11 percent at $104.88.