Merck KGaA wins battle for Versum

Merck KGaA has signed a definitive agreement to acquire Versum Materials, a US-based producer of electronic materials. The company’s offer, which Versum initially rejected as it pursued a merger with Integris, was accepted after it was raised from $48/share to $53. Versum has now terminated its discussions with Integris.

The deal gives Versum an enterprise value of about €5.8 billion, with a pro forma value of 11.6 x EBITA, including €75 million/year of identified run-rate cost synergies. It is expected to be accretive to reported earnings in the third full year after closing. This is expected to take place in 2H 2019, subject to agreement by Versum shareholders at a special meeting.

Merck CEO and executive board chairman Stefan Oschmann said that the transaction will leave the company “optimally positioned to capitalise on long-term growth trends in the electronic materials industry”. It is expected to significantly strengthen Merck’s Performance Materials business sector.

Versum, an Air Products spin-off, is described as one of the world’s major suppliers of high-purity process chemicals, gases and equipment for semiconductor manufacturing, with sales of $1.4 billion in 2018. It has 2,300 employees at 15 manufacturing and seven R&D facilities in Asia and North America. Merck will maintain the headquarters site at Tempe, Arizona, as the major hub for the combined business in the US.

The two companies had fought a brief war of words after Merck’s initial unsolicited offer. Versum rejected this, saying that it believed Integris’s offer to be better, and refused to engage with Merck. Merck then published an open letter to Versum shareholders, stating that its offer constituted a 51.7% premium to Versum’s pre-announcement price and 17.1% on the value of the Entegris stock they were being offered, and that Versum’s own financial advisor had concluded that the Merck offer was superior.