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Mergers & Acquisitions

Merck KGaA steps up effort to snag Versum

The German firm tells Versum shareholders that its offer is better than one from rival Entegris

by Michael McCoy
March 6, 2019 | APPEARED IN VOLUME 97, ISSUE 10

 

09710-buscon2-liquidcrystal.jpg
Credit: Merck KGaA
A scene from a Merck KGaA facility in Shanghai that makes liquid crystals for displays. Acquiring Versum would expand Merck's semiconductor materials business and help offset declining sales of display materials.

Merck KGaA, the German drug and chemical conglomerate, is raising the heat in its effort to break up the merger of Versum Materials and Entegris and take Versum for its own.

Versum and Entegris announced in late January plans to merge in an all-stock deal that would create a $3 billion-per-year supplier of materials and equipment to the semiconductor industry. Merck stepped in about a month later, saying it wants to acquire Versum instead. Its offer of $48 per share is a 52% premium over Versum’s stock price before the deal with Entegris was announced.

Versum’s board responded tepidly and later rejected Merck’s proposal, calling it not superior.

Now, Merck is making its case directly to Versum’s shareholders in an open letter dated March 5. Merck argues that an analysis by Lazard, Versum’s financial adviser, supports Merck’s view that its offer is superior to the merger with Entegris. The letter also points out that Versum entered the agreement with Entegris without a “market check” to determine what alternatives might be available.

In Versum, both suitors see a company that will bring strengths in advanced deposition materials, chemical mechanical planarization slurries, cleaning formulations, and specialty gases, according to Mike Corbett, a principal at the electronic materials consulting firm Linx Consulting.

At the same time, Corbett notes, Entegris and Merck are watching their semiconductor industry customers consolidate and their competitors—materials suppliers like Air Liquide, DuPont, and Linde—get bigger through acquisitions of their own. “The companies that aren’t doing deals aren’t moving forward in this industry,” he says.

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