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AIR PRODUCTS AND CHEMICALS, INC.

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Merck KGaA clinches $6.5 billion Versum takeover in bet on electrochemicals

04/12/2019 | 10:07am EDT
FILE PHOTO: A logo of drugs and chemicals group Merck KGaA is pictured in Darmstadt

FRANKFURT (Reuters) - Germany's Merck KGaA sealed a $6.5 billion (4.9 billion pounds) takeover deal with Versum Materials after overturning a deal it had agreed with rival bidder Entegris.

A bet on a recovery in electronic materials markets for semiconductor makers, the transaction will boost the share of profit that diversified Merck derives from high-tech chemicals to 27 percent from 19 percent previously.

Merck, also maker of pharmaceuticals and biotech production gear, this week won the backing of Versum's board for its $53-per-share offer, lifted from $48 previously, having been spurned for weeks.

"The business combination is expected to significantly strengthen Merck's Performance Materials business sector, creating a leading electronic materials player focussed on the semiconductor and display industries," it said in a statement.

Merck's swoop comes amid depressed stock prices in the volatile semiconductor industry after demand for mobile devices slowed and prices for memory chips sank.

But Merck said on Friday it would capitalise on global data processing and storage demand mushrooming by more than 30 percent per year until 2025, fuelled by trends such as artificial intelligence and autonomous driving.

Versum is the former speciality chemicals division of industrial gases group Air Products.

Merck, whose shares were down 2.5 percent at 1400 GMT is targeting 75 million euros (64.9 million pounds) in annual synergies by the third full year after closing of the deal, which it expects in the second half of 2019, it said in a statement on Friday.

The deal will increase earnings per share in the third full year after closing, while the increase will be immediate when adjusted for one-off items, it added.

The purchase will be financed with existing cash as well as a $4 billion bridge loan and a $2.3 billion term loan provided by Bank of America Merrill Lynch, BNP Paribas Fortis and Deutsche Bank.

Merck aims to preserve a strong investment grade credit rating, it said.

Guggenheim and Goldman Sachs are financial advisors, and Sullivan & Cromwell LLP is acting as legal counsel to Merck. Lazard and Citi are serving as financial advisors to Versum, with and Simpson Thacher & Bartlett LLP as legal counsel.

Entegris this week stepped back from the contest, saying it would not improve the terms of the all-share merger signed in January, which would have seen Versum investors receive about $44 worth of Entegris stock for each Versum share.

Versum had to pay Entegris a $140 million termination fee.

(Reporting by Ludwig Burger; editing by Thomas Seythal/Keith Weir)

By Ludwig Burger


ę Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
AIR PRODUCTS AND CHEMICALS, INC. 0.64% 289.67 Delayed Quote.5.35%
BANK OF AMERICA CORPORATION 1.44% 38.68 Delayed Quote.25.80%
BNP PARIBAS 1.78% 52.07 Real-time Quote.18.69%
ENTEGRIS, INC. 0.31% 120.15 Delayed Quote.24.64%
MERCK & CO., INC. -1.79% 76.93 Delayed Quote.-4.24%
MERCK KGAA -0.61% 172.25 Delayed Quote.22.73%
THE GOLDMAN SACHS GROUP, INC. 0.89% 377.55 Delayed Quote.41.91%
VERSUM MATERIALS, INC. 0.00%End-of-day quote.91.16%
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Financials (USD)
Sales 2021 9 937 M - -
Net income 2021 2 014 M - -
Net Debt 2021 3 078 M - -
P/E ratio 2021 31,8x
Yield 2021 2,01%
Capitalization 63 701 M 63 701 M -
EV / Sales 2021 6,72x
EV / Sales 2022 6,33x
Nbr of Employees 19 138
Free-Float 88,5%
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Air Products and Chemicals, Inc. Technical Analysis Chart | APD | US0091581068 | MarketScreener
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Number of Analysts 27
Last Close Price 287,83 $
Average target price 322,04 $
Spread / Average Target 11,9%
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Managers and Directors
Seifollah Ghasemi Chairman, President & Chief Executive Officer
Michael Scott Crocco Chief Financial Officer & Executive Vice President
Brian Galovich Chief Information Officer & Senior VP
Samir J. Serhan Chief Operating Officer
Chadwick C. Deaton Lead Independent Director
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