Merck Trumps Thermo Fisher with $7.2 Billion Buyout of Millipore

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--German drugmaker Merck KGaA (ETR:MRK) has entered into a $7.2 billion agreement to purchase Millipore (NYSE:MIL), a biotech laboratory equipment and materials company based in Billerica, Massachusetts. While not on the same scale of Merck's $41 billion acquisition of Schering-Plough in 2009, the deal nevertheless topped rival bidder Thermo Fisher Scientific's (NYSE:TMO) (Waltham, Massachusetts) offer of roughly $6 billion cash for Millipore, excluding debt.

Merck won the deal by including long-term debt of roughly $890 million on top of a $107 cash offer per share, financed through a combination of cash and a term loan. The offer is a jump of 13.3% over Millipore's closing price on Friday, February 26, of $94.41. A week earlier on February 19, before a hint of any deals surfaced, the company's shares closed at $71.34. Premarket trading on Monday, March 1, saw the shares reach $105.09. Both Millipore's and Merck's boards have approved the deal, with a final vote needed by Millipore's shareholders. Following the necessary approvals, Merck expects to close the deal before the end of 2010.

The Millipore buy will help Merck in a number of ways, including expanding its global presence. Although based in Billerica, where it is expected to continue to operate, Millipore conducts the majority of its business outside of the United States, with 40% of its sales in Europe. The diversification into lab equipment and biological material supply is also a plus for the drug giant as it seeks to focus on "high-margin specialty products with an attractive growth profile." Karl-Ludwig Kley, chairman of the executive board of Merck, said in a statement, "This transaction is very attractive to shareholders, customers and employees of both companies. This is a combination with an excellent strategic fit, which will allow us to cover the entire value chain for our pharma and biopharma customers, offering integrated solutions beyond chemicals."

The Merck-Millipore deal underscores the continuing trend in pharma turning to mergers and acquisitions for growth in rocky times (see 2010 Pharmaceutical-Biotech Forecast for more in-depth information). The spark from the Millipore buy provided a needed bit of light at the end of the proverbial tunnel after a series of costly regulatory setbacks. Last year, the U.S. Food and Drug Administration (FDA) rejected its application to market the multiple sclerosis pill cladribine as incomplete, and the European Medicines Agency refused the Erbitux tumor treatment for use in lung cancer, although the company is still in talks with the FDA on cladribine.

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