After paying $7 billion for Millipore, Merck KGaA will look for technology acquisitions and partnerships in mid-term.
Merck KGaA successful completed its $7 billion acquisition of Millipore yesterday and created the new EMD Millipore division. It will be known as Merck Millipore outside the U.S. and Canada. The segment combines Merck’s EMD Chemicals business, located in New Jersey, and Millipore to concentrate on the life science sector, with a pro forma turnover of €2.1 billion (roughly $2.73 billion).
The deal, reported on March 1, fortifies Merck’s position in biotech-research equipment and bioproduction. The firm paid $107 per share, about a 13% premium over Millipore’s closing price on February 26 of $94.41. Millipore went from trading at around $71 on February 19 to about $87 the next day due to rumors that Thermo Fisher Scientific had offered to pay $6 billion to buy the firm.
The acquisition is the biggest for Merck since its $13.7 billion purchase of Serono in 2007. Bernd Reckmann, Ph.D., the new head of EMD Millipore, told GEN that he doesn’t anticipate any company takeovers for the next 6–18 months. In the mid-term, though, the company will have its eyes open for technology-based acquisitions and partnerships.
“The priority for now is paying off our debt,” noted Dr. Reckmann, who has been with Merck since 1986. Millipore had long-term debt of $874 million at the end of the first quarter, and the $7 billion purchase price includes this debt. Merck financed the deal through available cash and a loan provided by Bank of America Merrill Lynch, BNP Paribas, and Commerzbank. The loan facility was replaced by bonds in March.
With the close of the transaction, one of the first orders of business will be to align cost savings and synergies, Dr. Reckmann said. Merck previously reported that EMD Millipore will likely result in costs of about $150 million, though it will generate savings of about $100 million a year. The Millipore acquisition reduces Merck’s reliance on pharmaceuticals, increasing the portion of revenue from the chemicals unit to 35% from about 25% now.
“We have no intentions of getting rid of any businesses since Merck and Millipore represent highly complementary businesses. We have nominated level one and level two management already, and the company is now working to define its strategy for the new combined business.”
Martin Madaus, CEO of Millipore, will not be joining EMD Millipore but will be available as an advisor during the integration process. Charles Wagner, the CFO of Millipore, and Bruce Bonnevier, corporate vp for human resources at Millipore, will leave the company. Joerg Hornstein, CFO for Merck Serono in China, has been appointed as the new head of controlling for EMD Millipore, and Toni Spinazzola, vp for human resources at Millipore, will become head of human resources for EMD Millipore.
Merck expects that the majority of integration decisions will be made by the end of year. Dr. Reckmann stressed that Merck will concentrate on keeping the momentum of the business and ensuring that all customers continue to get the service they expect from Merck and Millipore without any interruptions.
Merck will now begin the process of delisting Millipore’s shares from the New York Stock Exchange and removing the shares from registration with the U.S. Securities and Exchange Commission. With 10,000 employees in 64 countries, EMD Millipore will be headquartered in Billerica, MA, Millipore’s base. It will be supported by locations throughout the Americas, Europe, and Asia-Pacific.
EMD Millipore will offer a range of products, technologies, and services to improve laboratory productivity and develop and optimize manufacturing processes. It will also have enhanced global manufacturing and distribution capabilities. “The new combined entity will invest heavily in R&D, making it the third largest investors in R&D in the life science tools industry, according to Dr. Reckmann.
EMD Millipore will consist of three business units: bioscience, lab solutions, and process solutions. The bioscience unit already has a large portfolio of products, with Millipore contributing $500 million in sales, Dr. Reckmann noted. The lab solutions unit will leverage EMD Millipore’s strong position in chromatography, cell culture capabilities, as well as upstream and downstream solutions.
The process solutions unit will combine Millipore’s lab water and PMT business with Merck’s microbiology-focused business. The aim is to set a new standard in biological contamination analysis and removal, considering the already huge number of products in the company’s portfolio and now the global reach of the joint businesses, Dr. Reckmann asserted.
Merck also launched the Performance Materials business, which comprises Merck’s current Materials businesses and activities in liquid crystals, pigments, and cosmetics businesses.