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Germany's Merck to buy Sigma-Aldrich for $17 billion [St. Louis Post-Dispatch]
[September 22, 2014]

Germany's Merck to buy Sigma-Aldrich for $17 billion [St. Louis Post-Dispatch]


(St. Louis Post-Dispatch (MO) Via Acquire Media NewsEdge) Sept. 22--Global chemical supplier Sigma-Aldrich Corp., one of St. Louis' oldest and largest companies, is being acquired by German pharmaceutical company Merck for $17 billion.

Darmstadt-based Merck KGaA said Monday it will pay $140 per share in cash for all of Sigma-Aldrich's shares -- a premium of 37 percent over Friday's closing price -- to increase its North American presence and growth opportunities in fast-growing Asian markets.



The sale is set to close in mid-2015 pending regulatory approval and approval by Sigma-Aldrich shareholders. Sigma-Aldrich' board of directors unanimously approved the deal.

The acquisition will establish Merck as a leading player in the $130 billion global life sciences industry, company executives said.


"It's a quantum leap for our life sciences business," Karl-Ludwig Kley, chairman of Merck's executive board, said in a conference call with journalists Monday, adding it's the largest acquisition in the company's history. Founded in 1668, Merck operates under the name EMD in the U.S. in Canada.

Since 2011, Merck has focused on making efficiency improvements at its worldwide operations as part of its "Fit for 18" campaign, in preparation for the company's 350-year anniversary in 2018. Referencing the strides it's made in efficiency improvements, Kley said: "Now the focus is very much on growth." Combining Merck and Sigma-Aldrich will result in $340 million a year in cost savings within three years after closing the deal, Merck said. No details were released about the cost savings, however the company said it will maintain a significant presence in St. Louis and its EMD Millipore chemical and equipment division in Billerica, Mass., after the sale closes.

Referencing Sigma-Aldrich's 80-year history in St. Louis, Kley said the company has a "clear commitment" to the city and will uphold its civic responsibilities. Sigma-Aldrich is a sponsor of numerous schools, arts and nonprofit organizations, including KIPP Public Charter Schools, St. Louis Children's Hospital, the Danforth Plant Science Center, Washington University, the University of Missouri-St. Louis and St. Louis University.

"Sigma-Aldrich and St. Louis are synonymous," Kley said. "The U.S. is nearly half of the worldwide life sciences market. If you want to be a major player in life sciences, you have to have a sizable presence in the U.S." Merck executives also said they were drawn by Sigma-Aldrich's extensive global reach, with operations in 40 countries. Sixty percent of Sigma-Aldrich's sales are outside of the U.S.

Based at its headquarters campus on Spruce Street in midtown St. Louis near St. Louis University, Sigma-Aldrich is the world's largest supplier of biochemicals and organic chemicals to research laboratories. The company with $2.7 billion in revenue last year employs 9,000 people worldwide, including 1,800 in St. Louis. Sigma-Aldrich operates multiple facilities throughout the region for research and development, manufacturing and distribution.

Sigma-Aldrich's roots date to 1934 when two chemical engineers, brothers Aaron Fischer and Bernard Fischlowitz, started a consulting business, Midwest Consultants, helping other St. Louis firms develop adhesives, inks and shoe polishes. Its Sigma Chemical Co. division, led by Dan Broida, later expanded into biochemicals and clinical products. Sigma merged with Milwaukee's Aldrich Chemical Co. in 1975.

Its chemicals now can be found in toothpaste and coffee creamer, and the company's high-technology materials are used for smartphones and TV screens. Sigma-Aldrich's research unit, which includes chemicals and reagents used by scientists, accounts for 52 percent of its sales, and its applied unit that provides products and services for diagnostic companies, testing laboratories and industrial companies accounts for 24 percent of sales. Twenty-four percent of sales comes from its SAFC Commercial unit, which provides cell culture media, active pharmaceutical ingredients, and other products for LED and semiconductor manufacturing.

Sigma-Aldrich CEO Rakesh Sachdev said the deal was a positive outcome for shareholders due to the price premium and for employees, who will benefit from opportunities being a part of a larger, more global organization.

"Our two businesses are highly complementary from a science perspective," Sachdev said in the call.

Combined, the companies will have sales of more than $6 billion, more than 300,000 products and 2 million customers.

Merck invested in the life sciences sector in 2010 by acquiring a manufacturer of biomedical research products, Billerica, Mass.-based Millipore Corp., for $7 billion.

"Life sciences in general tends to be an industry that's growing faster than (gross domestic product)," analyst Dmitry Silversteyn of Longbow Research said of Merck's interest in Sigma-Aldrich. "It's a high margin business, fairly predictable, and they are a market leader." Merck shares shot up on the announcement, trading 8.9 percent higher at 75.82 euros. Sigma-Aldrich shares surged more than 33 percent in afternoon trading to $136.70 a share.

The company said it already had financing for the deal and would pay using a combination of cash, bank loans and bonds.

Merck KGaA is not affiliated with U.S. drug maker Merck & Co.

The Associated Press contributed to this report.

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