Germany's Merck to acquire Sigma-Aldrich for $17 billion

German firm Merck has signed a definitive agreement to acquire the US-based Sigma-Aldrich for $17 billion (Euro 13.1 billion), thus establishing itself as one of the leading players in the $130 billion global life science industry. Sigma-Aldrich is a leading life science and high technology company whose biochemical, organic chemical products, kits and services are used in scientific research, including genomic and proteomic research, biotechnology, pharmaceutical development, the diagnosis of disease and as key components in pharmaceutical, diagnostics and high technology manufacturing.
 
“This transaction marks a milestone on our transformation journey aimed at turning our three businesses into sustainable growth platforms”, said Karl-Ludwig Kley, Chairman of Merck’s Executive Board.
 
He added, “For our life science business it’s even more than that: it’s a quantum leap. In one of the world’s key industries two companies that fit perfectly together have found each other to present a much broader product offering to our global customers in research, pharma and biopharma manufacturing and diagnostic and testing labs. As such, the combination of Merck and Sigma-Aldrich will secure stable growth and profitability in an industry that is driven by trends such as the globalisation of research and manufacturing. What’s more, the combination gives us the possibility to invest even more in innovation going forward. We are delighted to make this compelling proposition to Sigma-Aldrich’s shareholders, who will obtain full and certain cash value for their shares.”
 
According to Rakesh Sachdev, President and Chief Executive Officer of Sigma-Aldrich, the combined company will be well-positioned to deliver significant customer benefits, including a broader, complementary range of products and capabilities, greater investment in breakthrough innovations, enhanced customer service, and a leading e-commerce and distribution platform in the industry. “This transaction is a clear validation of our success in transforming Sigma-Aldrich into a customer-focused and solutions-oriented global organisation. This is a testament to the strength of the Sigma-Aldrich brand and the accomplishments of our 9,000 employees worldwide,” he added.
 
The combined company will be able to serve life science customers around the world with a highly attractive set of established brands and an efficient supply chain that can support the delivery of more than 300,000 products. In the laboratory & academia business, together Merck Millipore and Sigma-Aldrich will offer their customers a complementary range of products across laboratory chemicals, biologics and reagents. In pharma and biopharma production, SigmaAldrich will complement Merck Millipore’s existing products and capabilities with additions along the entire value chain of drug production and validation.
 
The combined life science business will have solid growth potential, strong and sustainable cash flow, and meaningful efficiency potential on an operational level. Based on fiscal year 2013 financials, the business would have had combined sales of Euro 4.7 billion ($6.1 billion), an increase of 79% and combined EBITDA pre (earnings before interest, taxes, depreciation and amortisation before one-time items) of Euro 1.5 billion ($2.0 billion), which is an increase of 139%. Merck Group’s sales would have increased by approximately 19%.
 
The transaction has been unanimously approved by Sigma-Aldrich’s Board of Directors. A merger agreement will be presented to Sigma-Aldrich shareholders for approval at a special meeting of shareholders. The transaction has the full support of Merck’s Executive Board and E. Merck KG including its Board of Partners, and a Merck shareholder vote will not be required.
 
Closing is expected in mid-year 2015, subject to regulatory approvals and other customary closing conditions.