Date: 2014-09-22
Type of information: Company acquisition
Acquired company: Sigma-Aldrich (USA - MO)
Acquiring company: Merck KGaA (Germany)
Amount: $17.0 billion (€13.1 billion)
Terms: * On November 18, 2015 , Merck KGaA announced the completion of its $ 17 billion acquisition of Sigma-Aldrich, creating one of the leaders in the $ 130 billion global industry to help solve the toughest problems in life science. * On November 10, 2015, Merck KGaA announced that following the final approval of the European Commission it is set to complete its $17 billion (€13.1 billion) acquisition of Sigma-Aldrich. The European Commission had granted conditional approval to the acquisition of Sigma-Aldrich on June 15, 2015, subject to the divestment of certain SigmaAldrich assets. On October 20, 2015, Merck announced an agreement to sell parts of Sigma-Aldrich’s solvents and inorganics business to Honeywell. Now that the European Commission has approved that transaction, all necessary closing requirements have been fulfilled for Merck to complete the acquisition of SigmaAldrich. The formal completion date is scheduled for November 18, with the delisting of Sigma-Aldrich’s stock from NASDAQ taking effect following completion. * On August 11, 2015, Merck KGaA announced that approvals have been secured from all relevant jurisdictions for its planned acquisition of Sigma-Aldrich. Unconditional approval from Brazil’s Council for Economic Defense (CADE), which was the final outstanding country, was received. This clearance becomes effective after a common waiting period of 15 days. It follows recently received antitrust approvals from the competition authorities of Israel (IAA) and South Korea (KFTC). Merck expects a completion of the transaction in the third quarter 2015. The closing of the transaction is still subject to the Commitments made to the European Commission, following its conditional approval of the transaction, announced on June 15, 2015. As a result, Merck and Sigma-Aldrich have agreed to sell parts of Sigma-Aldrich’s solvents and inorganics business in Europe. * On June 15, 2015, Merck KGaA announced that the European Commission has approved its planned acquisition * On December 23, 2014, Merck announced that it has obtained antitrust clearance from the United States Federal Trade Commission (FTC) for its planned acquisition of US-based life science company Sigma-Aldrich. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) in connection with its proposed acquisition of Sigma-Aldrich Corporation expired on December 22, 2014, thereby completing the US HSR Act antitrust notification and review requirement for the two companies. US antitrust clearance satisfies a condition to closing the transaction, which remains subject to certain other closing conditions, including regulatory approval in other jurisdictions. Sigma-Aldrich shareholders have already approved the acquisition at a special meeting in St. Louis, Missouri, USA on December 5, 2014. Merck continues to expect the transaction to close in mid-2015. * On December 8, 2014, Merck KGaA successfully issued a hybrid bond with a two-tranche structure amounting to € 1.5 bn. The issuance is part of the financing of the proposed acquisition of U.S.-based life science company Sigma-Aldrich , which was announced in September 2014. Both tranches have a maturity of 60 years. The first tranche of € 1.0 billion pays a coupon of 2,625% and contains an early redemption option for Merck after 6.5 years. The second tranche, amounting to € 500 million and carrying coupon of 3,375%, includes an early redemption right after 10 years. The issuance supports Merck’s credit rating by receiving an equity credit treatment from both rating agencies Standard & Poor’s and Moody’s. The bond is subordinated to all of Merck’s other existent financial liabilities. * On December 5, 2014, Sigma-Aldrich Corporation stockholders voted to adopt the previously announced merger agreement providing for the acquisition of Sigma-Aldrich by Merck KGaA, at a special meeting of stockholders. Sigma-Aldrich stockholders also approved, on an advisory, non-binding basis, compensation that may become payable to named executive officers as a result of the acquisition. As previously announced, on September 22, 2014 , the board of directors for Sigma-Aldrich approved the merger agreement under which Merck KGaA will acquire Sigma-Aldrich for $140.00 per share in cash. The transaction, which is expected to close in mid-2015, remains subject to the satisfaction of the closing conditions set forth in the merger agreement, including regulatory approvals. * On September 22, 2014, Merck KGaA and Sigma-Aldrich announced that they have entered into a definitive agreement under which Merck will acquire Sigma-Aldrich for $17.0 billion (€13.1 billion), establishing one of the leading players in the $130 billion global life science industry. Merck will acquire all of the outstanding shares of Sigma-Aldrich for $140 per share in cash. The agreed price represents a 37% premium to the latest closing price of $102.37 on September 19, 2014, and a 36% premium to the one-month average closing price. The transaction is expected to be immediately accretive to Merck KGaA’s EPS pre and EBITDA margin. Merck KGaA expects to achieve annual synergies of approximately €260 million (approximately $340 million), which should be fully realized within three years after closing.
of Sigma-Aldrich. The EU clearance, which is subject to certain conditions, follows the recent antitrust approvals in Japan (JFTC) and by the Chinese Ministry of Commerce (MOFCOM). In addition, Merck has already secured antitrust clearance from the U.S., Taiwan, South Africa, Russia, Serbia and Ukraine. As part of the EU commitments, Merck and Sigma-Aldrich have agreed to sell parts of Sigma-Aldrich’s solvents and inorganics business in Europe. These include its manufacturing assets in Seelze, Germany, where most of the solvents and inorganics sold by Sigma-Aldrich in Europe are manufactured. In addition, the divestiture of solvents and inorganics sold by Sigma-Aldrich worldwide under the Fluka, Riedel-deHaen and Hydranal brands as well as a temporary license to the Sigma-Aldrich brand for the supply of solvents and inorganics in the European Economic Area have been agreed. The commitments also include the transfer of customer information and a solution to ensure a temporary channel to the market.
Based on the recent clearances, Merck said it will continue to work toward a mid-2015 completion of the transaction as detailed on the occasion of Merck’s first-quarter earnings release on May 19, 2015. The closing remains subject to certain other conditions, including remaining antitrust clearances from Brazil’s Council for Economic Defense (CADE) as well as from the competition authorities of Israel (IAA) and Korea (KFTC). Merck will continue to closely cooperate with the relevant antitrust authorities.
The transaction was significantly oversubscribed and generated strong international demand, with the majority being placed in Germany, France and the UK. The bond achieved a well-diversified distribution among a wide range of institutional investors such as fund managers, insurance companies and banks. Bookrunners of the transaction were Merck’s relationship banks. Merck is rated A flat (negative outlook) by Standard & Poor’s and A3 (under review for downgrade) by Moody’s.
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 €4.7 billion ($6.1 billion), an increase of 79% and combined EBITDA pre (earnings before interest, taxes, depreciation and amortization before one-time items) of €1.5 billion ($2.0 billion), which is an increase of 139%. Merck Group’s sales would have increased by approximately 19%. For the same period, the acquisition would have increased Merck Group’s EBITDA pre by approximately 24% and improved Group EBITDA pre margin from approximately 30% to approximately 33% including expected synergies.
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.
Bridge financing has been secured for the all-cash transaction, and Merck expects the final financing structure will comprise a combination of cash on Merck’s balance sheet, bank loans and bonds. Closing is expected in mid-year 2015, subject to regulatory approvals and other customary closing conditions.
Guggenheim Securities and J.P. Morgan are acting as financial advisers to Merck. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to Merck. Morgan Stanley & Co. LLC is acting as financial adviser to Sigma-Aldrich and Sidley Austin LLP is acting as legal adviser.
Details: 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, Sigma-Aldrich will complement Merck Millipore’s existing products and capabilities with additions along the entire value chain of drug production and validation.
The combination represents a strong operational and cultural fit. Merck KGaA plans to maintain a significant presence in St. Louis, and in Billerica, following completion of the transaction, as well as in important Merck Millipore sites such as Darmstadt and Molsheim, France.
Merck has successfully integrated a number of life science businesses in recent years, evaluating each company and combining the strongest operations, most efficient processes and most innovative programs that best support the future growth of the combined company. Merck KGaA intends to apply the same principles to the acquisition of Sigma-Aldrich in order to ensure a seamless integration. An integration team, which will include representatives from both companies, will be established to oversee and facilitate the integration process.
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