The German pharma firm Merck is aiming to prevent Versum Materials Inc from merging with another semiconductor components making company and has placed an offer of $5.9 billion for an acquisition of Versum.
A proposed merger between Tempe, Arizona-based Versum and Entegris Inc and Versum would be essentially dismantled by Merck’s offer of $48-a-share. The offer made by the German company is 52 per cent more than the price of a share of Versum before the merger was planned and announced last month and was 16 per cent more than Tuesday’s closing price.
Merck Chief Executive Officer Stefan Oschmann said in a letter to Versum’s board that the bid by the drugmaker “would deliver immediate and certain cash value to Versum stockholders and employees, shielding them from the significant integration, operational and market risks” of the Entegris merger.
The strategic value of a merger with Entegris is still very lucrative for Versum, the company said and added that Merck’s proposal would be reviewed by its board.
There were no comments from representatives of Entegris.
There was 18 per cent uptick in the shares of Versum after the news which increased the market valuation of the company at about $5.3 billion which was just over the value of Billerica, Massachusetts-based Entegris, which saw a drop of 4 per cent in its shares. There was a drop of 4.9 per cent in the shares of Merck, which is has not connection with U.S.-based Merck & Co.
Merck has embarked on an aggressive strategy of deal making and had recently complete a $4.2 billion agreement with GlaxoSmithKline Plc for collaboration on a an experimental cancer drug. There is also a need to boost the performance of its sluggish performance-materials division. There are a number of small and medium sized companies in the semiconductor field which have attractive technologies, Oschmann said earlier this month.
“Given the hostile nature of Merck’s approach to Versum we wouldn’t be surprised if Merck had to raise its offer at least once to secure the acquisition,” Richard Vosser, an analyst with JPMorgan Securities, said in a note.
Since the spinning out of Versum from Air Products & Chemicals Inc. in 2016, Merck had been eyeing the company. According to reports, the long-term strategic value of the company is the most attractive proposition of the company. Merck had conducted some serious internal studies about Versum but was taken by surprise when the Versum – Entegris merger was suddenly announced, according to reports.
Reports further said that dealmakers were aware of the interest of Merck in Bersum because typically before announcing deals, potential suitors are canvassed by companies.
Merck’s Chief Financial Officer Marcus Kuhnert said on a conference call that about 17 per cent of the third quarter sale of the company was accounted for by performance-materials unit of the company. This division has also had little growth in revenues in 2018. Half of the performance materials business would be comprised of semiconductors with the acquisition of Versum and according to Kuhnert, there would be annual synergy of 60 million euros from the merger by 2022.
The purchase would “strengthen the company’s diversification profile as it would increase its exposure to the fast-growing electronic materials market where it would become a leading player,” said Knut Slatten, a pharma analyst at Moody’s Investors Service. It would also lead to “a more balanced split in between its three core divisions.”