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Germany´s Merck KGaA Closes USD 6.5bn Cash Acquisition of Versum Materials
Tuesday 08 October 2019

8 October 2019 - German science and technology company Merck KGaA has closed the acquisition of US-based semiconductor manufacturing chemicals, gases and equipment supplier Versum Materials, Inc. (NYSE: VSM) for USD 53 per share in cash, the company said.

The business combination has been unanimously approved by the executive board of Merck KGaA, Darmstadt, Germany and by Versum's board of directors.

Versum is one of the world's largest suppliers of high-purity process chemicals, gases and equipment for semiconductor manufacturing.

It was formed as a result of US-based industrial gasses and chemicals company Air Products and Chemicals' spinning off its Electronic Materials division in 2016.

Versum reported annual sales of approximately EUR 1.2bn (USD 1.4bn) in FY2018, has approximately 2,300 employees, and operates 15 manufacturing and seven research and development facilities throughout Asia and North America.

Versum has achieved revenue and adjusted EBITDA compounded annual growth in excess of 10% over the last three fiscal years with industry-leading adjusted EBITDA margins at 33%.

The business combination is expected to significantly strengthen Merck KGaA, Darmstadt, Germany's Performance Materials business sector, creating a leading electronic materials player focused on the semiconductor and display industries.

The business combination rebalances the company's diversified three pillar portfolio of Healthcare, Life Science and Performance Materials while executing on Performance Material's previously communicated transformation programme.

The combined companies and their customers and employees will benefit from increased scale, product portfolio, innovation and services depth, globally. In addition, with the combined business, the Performance Materials business sector will strengthen its global supply chain.

Merck KGaA, Darmstadt, Germany intends to maintain Versum's Tempe, AZ headquarters as the major hub for the combined electronic materials business in the United States, complementing Merck KGaA, Darmstadt, Germany's already strong footprint and track record as a top employer in the US.

Over the past decade, the company has invested approximately USD 24bn in the US through acquisitions alone, including the successful acquisitions of Millipore in 2010 and Sigma-Aldrich in 2015.

Versum employees will become an integral part of a leading electronic materials business and will benefit from new and exciting development opportunities within a truly global science and technology company.

The agreed upon price reflects an enterprise value for Versum of approximately EUR 5.8bn, implying an EV/2019 EBITDA multiple of approximately 13.7x based upon consensus estimates and a pro-forma multiple of 11.6x including EUR75 m of identified annual run-rate cost synergies.

The business combination is expected to be immediately accretive to earnings per share pre (EPS pre) and accretive to reported EPS in the third full year after closing.

In accepting Merck KGaA's proposal Versum is terminating a previous buyout deal with US-based Entegris. Entegris reported it has received a USD 140m termination fee from Versum.

Versum's board of directors, in consultation with its legal and financial advisors, has unanimously determined that this business combination constitutes a "Superior Proposal" as defined in Versum's previously announced merger agreement with Entegris, Inc., and Versum has terminated the merger agreement with Entegris concurrently with the execution of the definitive agreement with Merck KGaA, Darmstadt, Germany.

The business combination will be financed with cash on hand and debt by way of a facilities agreement with Bank of America Merrill Lynch, BNP Paribas Fortis and Deutsche Bank AG. Merck KGaA, Darmstadt, Germany, is committed to preserving its strong investment grade credit rating.

Concurrently with the signing, the previously announced tender offer to acquire Versum common stock has been terminated and the contested solicitation of proxies has also ended.

Merck KGaA, Darmstadt, Germany, a long-term oriented, predominantly family-owned leader in science and technology, operates across healthcare, life science and performance materials.

Around 52,000 employees work to make a positive difference to ms of people's lives every day by creating more joyful and sustainable ways to live.

In Merck KGaA, Darmstadt, Germany's more than 350-year history, people have always been and will continue to be at the center of everything it does.

From advancing gene editing technologies and discovering unique ways to treat the most challenging diseases to enabling the intelligence of devices the company is everywhere. In 2018, Merck KGaA, Darmstadt, Germany, generated sales of EUR 14.8bn in 66 countries.

The company holds the global rights to the name and trademark "Merck" internationally. The only exceptions are the United States and Canada, where the business sectors of Merck KGaA, Darmstadt, Germany, operate as EMD Serono in healthcare, MilliporeSigma in life science, and EMD Performance Materials.

Since its founding 1668, scientific exploration and responsible entrepreneurship have been key to the company's technological and scientific advances.

To this day, the founding family remains the majority owner of the publicly listed company.

Versum Materials reported fiscal year 2018 annual sales of about USD 1.4bn, has approximately 2,300 employees and operates 14 major facilities in Asia and the North America.

It is headquartered in Tempe, Arizona. Versum Materials had operated for more than three decades as a division of Air Products and Chemicals, Inc. (NYSE: APD).
Date Published: 08/10/2019
Target: Versum Materials, Inc
Country: USA
Sector: Computer Hardware
Type: Corporate acquisition
Financing: Cash
Status: Closed
Buyer: Merck KGaA
Terms of the deal were not disclosed