The CEO of a laboratory science company — most likely Thermo Fisher Scientific Inc.’s (NYSE:TMO) Marc Casper — helped set off the bidding contest for Millipore Corp. (NYSE:MIL) when he proposed a cash acquisition of the maker of filters and instruments in a Jan. 4 letter to company officials, according to recent securities documents.
The auction was eventually won nearly two months later by Merck KGaA (NYSE:MRK), a German chemical and pharmaceuticals manufacturer, with a $7.2 billion, $107-a-share offer, including acquired debt. In between, Millipore was shopped to two other companies besides Merck and the original bidder, which Millipore would only identify as “Company A” in the preliminary proxy statement filed March 24.
Thermo Fisher officials never publicly acknowledged that they sought to acquire Millipore, although many of the actions attributed to Waltham, Mass.-based TMO in news reports Feb. 22 closely mirror activity by Company A as described in the Millipore proxy filing.
Over the course of the negotiations, Company A boosted its bid three times — starting at $92 a share and eventually going as high as $105 a share in cash — never quite beating Merck’s $107 opening bid. Merck, however, made its initial offer contingent on securing outside financing and giving Millipore officials just enough pause to keep entertaining alternative offers.
The Feb. 28 deal between Millipore and Merck still needs to be reviewed by U.S. and European regulators, and because Merck is a foreign company, also gain White House approval under the Defense Production Act of 1950. Two-thirds of Millipore shareholders, likewise, will need to sign off on the deal during a special meeting not yet scheduled.
The companies previously said they expect the acquisition to close during the second half of 2010.
According to the proxy, the CEO of Company A met briefly in early January with Millipore CEO Martin Madaus, who then took the $92 a share offer to the Millipore board. The board concluded during a Jan. 22 special meeting that the offer was too low and authorized the Goldman Sachs Group Inc. (NYSE:GS) to instead conduct a private auction involving up to four other firms.
From the outset, Millipore sought to limit the number of potential suitors to avoid premature disclosure of a potential deal. Would-be buyers also were evaluated for a strategic fit with Millipore as well as their ability to pay for an acquisition. Both Merck and Company A made the short list, as did two other, unidentified companies that signaled their interest after being contacted by Goldman Sachs.
Millipore executives made formal presentations to each of the four companies during the week of Feb. 8, and after distributing a draft merger agreement to the firms, gave them until Feb. 26 to finalize their offers and detail how they would finance a deal.
News reports broke Feb. 22 that Thermo Fisher was close to swinging a $6 billion bid for Millipore, sending Millipore shares sharply higher. Thermo Fisher officials refused to comment, but Millipore issued a statement the next day confirming that the company was examining strategic alternatives, including a possible acquisition.
Behind the scenes, Company A and Merck were working to firm up their bids by the Feb. 26 deadline. Merck came in at $107 a share — well above Company A’s offer of $92.50 a share — but during meetings Feb. 27 Millipore executives decided to try convincing Merck to drop the conditional terms of its bid. Goldman Sachs later that day told Company A that Millipore intended to go with another company, prompting Company A to verbally increase its offer to $101 a share and setting off another round of discussions at Millipore.
Neither of the other two companies that indicated an early interest in acquiring Millipore submitted formal bids.
After receiving word from Millipore officials that its bid still was too low, the CEO at Company A made one last run at a deal, telephoning Madaus with a $105-a-share bid but also telling the Millipore executive there was no further room for improvement. Merck, meanwhile, dropped the contingency language from its offer and also provided additional details of a prospective term loan with Bank of America (NYSE:BAC), BNP Paribas and Commererzbank Atkiengesellschaft.
Madaus and the chief executive at Company A talked one last time around 10 p.m. on Feb. 27, with the CEO repeating to Madaus that $105 a share would be its final offer.
Millipore officials continued talks Feb. 28 to finalize the merger agreement and fine-tune internal provisions accelerating the vesting of restricted stock units (RSUs) and options held by company executives and directors prior to an acquisition. Madaus will be the big beneficiary of that contract language, holding RSUs and options converting into about 375,000 shares and resulting in $40.2 million in gross proceeds. Eighteen other employees and directors share about 475,000 RSUs and options worth about $50.8 million, according to data provided in the preliminary proxy.
Millipore directors, with one absent, voted unanimously Feb. 28 in favor of the Merck offer. The companies signed the merger agreement later that afternoon and announced the deal early that evening.
