Boston, MA 09/23/2014 (wallstreetpr) – Merck & Co., Inc. (NYSE:MRK), the Germany-based pharmaceutical company, has offered to buy Sigma-Aldrich Corporation (NASDAQ:SIAL) for $17 billion.
Terms Of Deal
Sigma-Aldrich Corporation (NASDAQ:SIAL) is among the biggest manufacturers of chemicals and biological substances used in labs. The life science and high-technology Company had recorded sales of as much as $2.7 billion in 2013. Almost 50% of the company’s revenues are derived from educational laboratories, medical companies and industrial manufacturers which conduct research and development.
Merck seeks to buy the company in a $140 per share cash transaction. The quoted figure marks a premium of 37% to Sigma-Aldrich’s closing price last week on Friday. According to industry experts, the premium offer made by Merck & Co., Inc. (NYSE:MRK) is too high for Sigma-Aldrich. As stated in The New York Times’ article, the acquisition would increase Merck’s presence in the U.S. In addition, it would also allow the company to expand to Asian markets.
A Strong Move
According to Wall Street Journal’s article, the acquisition is a part of Merck’s recent efforts to decrease its reliance on developing novel drugs. This is because currently Merck is mostly dependent on its biggest pharmaceutical business, Merck Serono. The unit is in itself chiefly reliant on only two major drugs, namely multiple sclerosis treatment Rebif and cancer therapy Erbitux. Merck & Co., Inc. (NYSE:MRK)’s earnings will also be influenced with this merger almost immediately as they would become more predictable.
The merger, which Merck believes to be “quantum leap” in regards to its life sciences business, is the latest such instance of consolidation among developers of lab testing materials. In 2013, Thermo Fisher Scientific Inc. (NYSE:TMO) offered $13.6 billion to acquire Life Technologies Corp (NASDAQ:LIFE), sigma-Aldrich’s competitor.
In view of some analysts, after acquiring Sigma-Aldrich, Merck & Co., Inc. (NYSE:MRK) will be in a better position against rivals in the pharmaceutical business. Most pharmaceutical companies have recently cut down on the number of suppliers, as an effort to reduce expenses.
