Merck KGaA To Buy Sigma-Aldrich In $17 Bln Cash Deal; Stock Up

(RTTNews) - German drug maker Merck KGaA (MKGAY.PK) said Monday that it agreed to buy Sigma-Aldrich Corp. (SIAL) for $140 per share in cash, totaling $17.0 billion or 13.1 billion euros, establishing a major player in the life science industry. Merck expects the transaction to be immediately accretive to its earnings.

Merck KGaA shares were gaining around 7 percent On Frankfurt's Xetra, and Sigma-Aldrich shares were gaining around 35.15 percent in pre-market activity on Nasdaq.

Sigma-Aldrich is a life science and high technology company with 9,000 employees. It manufactures chemicals, biochemicals and equipments, and also provides biopharmaceutical testing services. In late July, Sigma-Aldrich reported higher profit in its second quarter, with 3 percent increase in sales to $701 million.

Merck said the agreed price represents a 37 percent premium to the latest closing price of $102.37 on last Friday, and a 36 percent premium to the one-month average closing price.

The company expects to achieve annual synergies of about 260 million euros or approximately $340 million, which should be fully realized within three years after closing.

According to the firm, the acquisition expands its division EMD Millipore's global reach, increasing the company's presence in North America and adding exposure to fast-growing Asian markets. Merck expects the combined life science business to have solid growth potential, strong and sustainable cash flow, and meaningful efficiency potential on an operational level.

Based on fiscal year 2013 financials, the business would have had combined sales of 4.7 billion euros or $6.1 billion, an increase of 79 percent and combined EBITDA pre of 1.5 billion euros or $2.0 billion, an increase of 139 percent. Further, Merck's total 2013 sales would have increased by approximately 19 percent, and EBITDA pre by approximately 24 percent.

Closing is expected mid-year 2015, subject to regulatory approvals, approval by a special meeting of the shareholders of Sigma-Aldrich and other customary closing conditions.

The company noted that it has secured bridge financing for the all-cash transaction, and expects the final financing structure will comprise a combination of cash on its balance sheet, bank loans and bonds.

On Frankfurt's Xetra, Merck KGaA shares were gaining 4.56 euros or 6.55 percent, and trading at 74.16 euros.

In pre-market activity, Sigma-Aldrich shares were gaining $35.98 or 35.15 percent, and trading at $138.35.