Following a week of rumors and speculation, on February 28, German pharmaceuticals and chemicals giant Merck KGaA announced the purchase of Millipore for approximately $7.2 billion (see IBO 2/28/10). The purchase was the largest acquisition of an instrument and laboratory products company since Invitrogen’s 2008 purchase of Applied Biosystems for $6.7 million (see IBO 11/15/08). The deal follows two other acquisitions surpassing $1 billion: Agilent’s $1.5 billion purchase of Varian (see IBO 7/31/09) and Danaher’s combined $1.1 billion purchase of Life Technologies’ MS business and MDS Analytical Technologies (see IBO 9/15/09).

Merck’s offer reportedly topped a $6 billion proposal from Thermo Fisher Scientific, according to Bloomberg and Reuters. Reports of that offer and others pushed Millipore’s stock up 32% to a high of $94.75 between February 21 and February 26. The final offer price represented a 14% premium over Millipore’s closing stock price on February 26.

One of the world’s oldest pharmaceuticals companies, Merck KGaA is majority controlled by Germany’s Merck family. The publicly held company posted 2009 revenues of €7,747 million ($10,759 million = €0.72 = $1), with pharmaceuticals, including the biotech-focused Merck Serono, accounting for 75% of revenues. The company’s Chemicals business consists of two divisions: Liquid Crystals, and Performance and Life Science Chemicals. Performance and Life Science Chemicals’s 2009 sales declined 3.8% to €1,202 million ($1,669 million), as sales for the Pigments business fell.

Merck stated that the acquisition adds a third growth driver, in addition to Merck Serono and Liquid Crystals. In its conference call, Merck emphasized that Millipore’s offering of high-margin specialty products will balance the sales of the company’s chemicals and pharmaceuticals businesses. Merck also noted the geographic expansion, R&D expertise and critical mass in bioscience that Millipore will provide.

Millipore will be combined with the Laboratory and Life Science Solutions segments of Merck’s Performance and Life Science Chemicals business to form a new division, which is expected to be called EMD Millipore, according to Merck’s conference call. EMD Chemicals is the name of Merck’s North American chemicals business.

Currently, Merck’s Laboratory Business products include: lab chemicals; chromatography consumables, such as analytical and preparative HPLC columns and materials; GC sorbents; pH tests; reference materials and microbiology products. In 2009, Laboratory Business revenue grew 0.6% to €524 million ($728 million).

For the laboratory, Merck’s Life Science Solutions offers antibodies, biochemicals, assays, bioreagents, expression and transfection consumables, and protein-research consumables. Brands include Calbiochem, Novabiochem and Novagen. The Life Science Solutions business also offers products for biopharmaceutical production, as well as cosmetic active ingredients. Revenue for Life Science Solutions increased 1.2% last year to €440 million ($611.1 million).

Merck estimated that pro forma 2009 sales for Merck-Millipore combined would have been €2.1 billion ($2.9 billion), with Millipore accounting for 57% of sales. Merck-Millipore would have accounted for 23% of Merck’s total 2009 sales. According to Merck, Merck-Millipore’s pro forma 2009 Bioscience sales were €386 million ($536 million), with Millipore contributing 80% of sales. The companies’ Laboratory sales were €667 million ($926.4 million), with 68% of sales from Merck. The companies’ pharmaceutical and biotech production pro forma 2009 sales were €1,012 million ($1,405 million), with Millipore accounting for 66% of the total.

Pro forma 2009 combined sales for the companies were estimated to be €737 million ($1,023 million) in the Americas, with Millipore contributing 64%. Merck accounted for 53% of European pro forma combined sales of €897 million ($1,245 million). In Asia Pacific, Millipore accounted for 54% of combined pro forma 2009 sales of €431 ($598 million).

Merck estimates integration costs will total $150 million, half of which will be recorded this year. The company plans to fund the purchase with cash and a term loan. The acquisition requires approval of both firms’ shareholders, and regulatory approval. The deal is expected to close in the second half of the year.

Chart: Merck-Millipore Pro Forma 2009 Sales by Segment

Bioscience 386

Lab Business 667

Pharma & Biotech Production 1012