Germany pharmaceutical company, Merck KGaA said on Monday that it would purchase United States firm Sigma-Aldrich Corp in a $17 billion deal, as it bids to increase its strength in the industry of life science.
Merck will purchase Sigma-Aldrich in a deal of $140 per share in cash, which is 37% to the closing of Sigma’s share on Friday. The takeover is the largest for Merck and it represents a “quantum leap” for its business in life sciences. This will increase its presence in Asia and North America as Karl-Ludwig Kley, Chief Executive said, as The Wall Street Journal reports.
Merck shares increased as investors bet that this move would place the company among the leading companies in the $130 billion industry of global life science.
Ulrich Huwald, Warburg analyst said, “This looks like a very strategic deal and, at first glance, it makes a lot of sense-even if the size of the deal is surprising.”
Sigma-Aldrich deals in products used in scientific development and research in fields ranging from pharmaceuticals to biotechnology and is based in St. Louis. The company manufactures high-technology items for TV screens and smartphones.
According to Bloomberg, Sigma-Aldrich rose 34% to $137.05. Bloomberg Intelligence analyst, Asthika Goonewardene said in regard to Merck, “They seem to be backing away from drug development, which they haven’t been successful in for the last few years.”
Merck is family controlled and was founded in 1668. It got around 58% of revenue from its pharmaceuticals and 39% from its chemicals last year. The company manufactures liquid crystals for flat-screen TVs, chemicals and lab equipment. In 2007, Merck acquires Serono, Swiss Biotechnology Company and has not had any new or major drug approved from 2003.
Kley said, “Merck will always build its future on three pillars of pharmaceuticals, liquid crystals, lab equipment and lab chemicals.”
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