Germany’s Merck To Buy Sigma-Aldrich

Sigma-Aldrich has agreed to be acquired by Germany’s Merck for $17 billion. The deal will join two of the largest suppliers of laboratory chemicals and ingredients for pharmaceutical manufacturing into a company with more than 300,000 products and annual sales of more than $6 billion.

Merck KGaA views the deal as a way to build its Merck Millipore life sciences business, which sits alongside its pharmaceuticals and performance materials units. Merck and Sigma-Aldrich “fit perfectly together,” according to Karl-Ludwig Kley, chairman of Merck’s executive board.

The acquisition “will secure stable growth and profitability in an industry that is driven by trends such as the globalization of research and manufacturing,” Kley says. It will also provide greater scale in the $130 billion life sciences product market, particularly in the U.S. and Europe. Merck’s roots in pharmaceuticals and chemicals date back nearly 350 years, and the company remains largely family owned.

Kley also argues that the merger will offer new opportunities. “The combination gives us the possibility to invest even more in innovation going forward,” he says. Merck also expects to realize about $340 million in annual cost savings within three years. It plans to maintain a significant presence in Sigma-Aldrich’s headquarters city of St. Louis and in Billerica, Mass., the base of Millipore’s lab chemicals business in the U.S.

Sigma-Aldrich was formed in 1975 from the merger of Aldrich Chemical, founded in 1951, and then-32-year-old Sigma Chemical. Through a combination of acquisitions and organic growth, the company has grown to have revenues of $2.7 billion in 2013. It employs about 9,000 people, including 3,000 scientists and engineers.

Under the $140.00-per-share cash deal, Merck is offering a 36% premium to Sigma-Aldrich’s recent stock price. “We believe this is a very positive outcome for our shareholders, who will receive a significant premium, and our employees, who will benefit from enhanced opportunities as part of a larger, more global organization,” Sigma-Aldrich CEO Rakesh Sachdev says.

Sigma-Aldrich shareholders must still approve the deal, whereas no more approvals are required from the Merck side.