DARMSTADT, Germany–Merck KGaA, a global pharmaceutical and chemical company, on Feb. 28 entered into a definitive agreement to acquireall outstanding shares of common stock of Billerica, Mass.-based life sciences company Millipore Corp., for $107 pershare in cash, or a total transaction value, including net debt, ofapproximately $7.2 billion. The transaction wasapproved by the boards of directors of both companies, with an eye toward "achieving significant scale in high-marginspecialty products with an attractive growth profile."

 

"Thistransaction is very attractive to shareholders, customers and employeesof both companies," says Dr. Karl-Ludwig Kley, chairman of the executive board of Merck. "This is a combination with an excellentstrategic fit, which will allow us to cover the entire value chain forour pharma and biopharma customers, offering in entire value chain forour pharma and biopharma customers, offering integrated solutionsbeyond chemicals."

Merck notes that Millipore has a strong position in the attractivebioresearch and bioproduction segments, offering a comprehensive rangeof products, technologies and services for pharma and biotechcompanies, as well as for academia, to improve laboratory productivityand to develop and optimize manufacturing processes. In 2009, Milliporegenerated sales of $1.7 billion, with around 6,000 employees in morethan 30 countries.

Martin Madaus, chairman, president and CEO ofMillipore says, "Over the past five years, we have transformedMillipore into a life science leader by driving innovation, enteringnew markets, and generating exceptional operational performance.Today's announcement, which is the outcome of a thorough strategicreview process, is a validation of the tremendous value of theMillipore brand and a testament to the value this transformation hascreated for all of our stakeholders. We are excited to join ahigh-quality company like Merck as we will gain greater scale and scopein the life science industry. This is a very positive outcome for ouremployees and customers as we continue to build on our strategy forgrowth, while maintaining our headquarters in Billerica."

Together, Millipore and Merck will have asignificant presence in high-growth segments and an enhanced geographicpresence. Combining the research and development capabilities of bothcompanies, they seek to "create a powerful innovation platform to developcutting-edge technologies that are tailored even more closely to theneeds of customers."

"By combining Millipore's bioscienceand bioprocess knowledge with our own expertise in serving pharmacustomers, we will be able to unlock value in our chemicals businessand transform it into a strong growth driver for Merck. Through thisacquisition, we will expand the overall product offering of the MerckGroup, using the well-recognized Millipore brand in addition to our ownbrand," Kley adds.

The acquisition is said to be "fully in line" with Merck'sstrategy of focusing on high-margin, specialty products with anattractive growth profile. In addition, the transaction is expected to lead to amore balanced business profile for the group. Currently, the chemicalsbusiness sector generates around 25 percent of Merck's total revenues.Following the transaction, the chemicals business will contribute 35 percentof total group revenues.

In order to ensure a seamless integration of the twobusinesses, Merck will apply a "best of both worlds" integrationapproach across all operating business functions. Merck plans to buildon Millipore's talented workforce and intends to retain its seniormanagement. The company also plans to maintain Millipore's headquartersin Billerica and combine it with Merck's U.S. chemicals headquarters.Merck expects that the combined business will generate annual costsynergies of around $100 million, which Merck expectsto realize within three years from the closing of the transaction.

Completion of the acquisition requires the approvalof Millipore shareholders, for which Millipore will call a specialshareholders meeting, and the satisfaction of other customaryconditions, including antitrust clearance. Due to the fact that the twobusinesses are highly complementary, Merck expects that the transactionwill clear regulatory review. Merck anticipates that the transactionwill be completed in the second half of 2010, at which time alloutstanding shares of Millipore common stock will be exchanged for theright to receive the agreed cash payment.