Global chemical supplier Sigma-Aldrich Corp., one of St. Louisâ largest employers, 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-Aldrichâs shares â a premium of 37 percent over Fridayâs closing price â to increase its North American presence and growth opportunities in fast-growing Asian markets.
The sale is set to close in mid-2015 pending approval by regulators as well as by shareholders of Sigma-Aldrich. The Sigma-Aldrich board of directors has already unanimously approved the deal.
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The acquisition will establish Merck as a leading player in the $130 billion global life sciences industry, company executives said.
âItâs a quantum leap for our life sciences business,â Karl-Ludwig Kley, chairman of Merckâs executive board, said in a conference call with journalists Monday, adding itâs the largest acquisition in the companyâs history. Founded in 1668, family-controlled Merck operates under the name EMD in the U.S. and Canada.
Since 2011, Merck has focused on making efficiency improvements at its worldwide operations as part of its âFit for 18â campaign, in preparation for the companyâs 350-year anniversary in 2018. âNow the focus is very much on growth,â Kley said.
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 savings; however, the company said it will maintain a significant presence in St. Louis and at its EMD Millipore chemical and equipment division in Billerica, Mass., after the sale closes.
Referring to Sigma-Aldrichâs 80-year history in St. Louis, Kley said the company has a âclear commitmentâ 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 Childrenâs Hospital, the Danforth Plant Science Center, Washington University, the University of Missouri-St. Louis and St. Louis University.
âSigma-Aldrich and St. Louis are synonymous,â Kley said. âThe 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.â
Merck executives also said they were drawn by Sigma-Aldrichâs extensive global reach, with operations in 40 countries. Sixty percent of Sigma-Aldrichâs sales are outside of the U.S.
Based at its headquarters on Spruce Street, Sigma-Aldrich is the worldâs 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-Aldrichâs roots date to 1934 when two chemical engineers, brothers Aaron Fischer and Bernard Fischlowitz, started 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 Milwaukeeâs Aldrich Chemical Co. in 1975.
Its chemicals now can be found in toothpaste and coffee creamer, and the companyâs high-technology materials are used for smartphones and TV screens. Sigma-Aldrichâs 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 because of the price premium and for employees, who will benefit from opportunities of being a part of a larger, more global organization.
âOur two businesses are highly complementary from a science perspective,â 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.
âLife sciences in general tends to be an industry thatâs growing faster than (gross domestic product),â analyst Dmitry Silversteyn of Longbow Research said of Merckâs interest in Sigma-Aldrich. âItâs a high-margin business, fairly predictable, and they are a market leader.â
Merck rose 4.4 percent to close Monday at 72.63 euros, giving the company a market value of 31.6 billion euros ($40.5 billion). The gain was the biggest since Dec. 5. Sigma-Aldrich shares surged by $34.03, or more than 33 percent, to close at $136.40.
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. drugmaker Merck & Co.
The Associated Press and Bloomberg News contributed to this report.