German pharmaceutical and chemical company Merck KGaA (NYSE:MRK) trumped other would-be suitors and struck a deal to acquire Millipore Corp. (NYSE:MIL) for $6 billion in cash plus about $890 million in Millipore debt.
The acquisition was announced early Sunday night by the two companies. At $107 a share, the deal marks just over a 50 percent premium from Millipore’s stock price a week ago, when word leaked that Thermo Fisher Scientific Inc. (NYSE:TMO) was preparing a bid for Millipore.
Merck officials said the deal fits with the company’s efforts to acquire high-margin, specialty product offerings. Under the proposal, Millipore — which produces specialty filters for water used in laboratory, drug and biotech applications, among other products — would be merged with Merck’s U.S.-based chemical operations, generating as much as $12 billion a year, or 35 percent of the combined companies’ total revenues.
“This transaction is very attractive to shareholders, customers and employees of both companies,” Dr. Karl-Ludwig Kley, chairman of Merck’s executive board, said in prepared remarks. “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.”
Directors at both companies have signed off on the agreement, which still is subject to approval by Millipore shareholders and regulatory reviews. Millipore, which now has about 6,000 employees, will retain its headquarters in Billerica, Mass. Merck did not say whether it intends to trim any workers once the deal is completed during the second half of 2010, although officials said they expect to cut as much as $100 million in yearly operational cost within the first three years.
Merck plans to pay for the acquisition with available cash and a term loan provided by Bank of America Merrill Lynch, BNP Paribas and Commerzbank Aktiengesellschaft. It said the company eventually will replace a portion of the new loan facility by issuing bonds.