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Mergers & Acquisitions

Versum accepts sweetened deal from Merck KGaA

Increased takeover offer convinces electronic materials maker to drop merger with Entegris

by Michael McCoy
April 8, 2019

20190408lnp3-hsinchu.jpg
Credit: Merck KGaA
Merck KGaA makes materials for the electronics industry at this facility in Hsinchu, Taiwan.

Five dollars per share more did the trick. Merck KGaA, the German drug and chemical conglomerate, has increased its offer to acquire Versum Materials by that amount, and Versum has accepted.

The agreement may mark the end of a takeover battle that began in late January when Versum and Entegris announced that they were merging into a $3 billion-per-year supplier of high-purity materials for making computer chips.

A few weeks later, Merck stepped in with an offer to acquire Versum for $48 per share in cash, or about $6 billion including Versum’s debt. Merck contended that its offer—a 52% premium over Versum’s stock price before the Entegris deal was announced—was superior because it provided shareholders more certainty than the merger with Entegris did.

Versum produces deposition materials, specialty gases, and chemical mechanical planarization slurries; it had sales last year of about $1.4 billion. Both deals would make it part of a larger supplier of materials for semiconductor fabrication, but the product mixes would be different.

Versum initially resisted Merck’s overture, saying that the merger with Entegris had more upside potential over the long term. Versum urged shareholders to vote for the Entegris deal, but it also acknowledged that it would hold private talks with Merck.

On April 3, Merck CEO Stefan Oschmann and Versum Chair Seifi Ghasemi met in New York City to discuss a potential deal. The two executives held a follow-up meeting on April 6 in Munich at which Oschmann raised Merck’s offer to $53 per share.

The next day, April 7, Versum informed Entegris that it had received what it considers a superior proposal. From that point, Entegris has four days to raise its offer.

Entegris disclosed this morning that it considered its options and that it has no plans to revise its deal. Still, analysts at the investment firm Jefferies say Entegris might yet come back with a better offer, given its financial flexibility and the good business fit between Entegris and Versum.

And if Entegris does walk away, it will have one small consolation: Versum is obligated to pay it a $140 million breakup fee.

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