Merck KGaA has agreed to purchase Sigma-Aldrich Corp to the tune of $17B in cash, in hopes of expanding the range of chemicals used in research labs and pharmaceutical manufacturing while reducing its dependence on drug development.
Merck’s move away from developing pharmaceuticals couldn’t come at a better time, as their Sereno biotechnology business has struggled to create new products in recent years. Merck acquired Millipore Corp, a U.S. maker of lab equipment and chemicals, in 2010 for approximately $6B. They also bought AZ Electronic Materials SA, a chemical supplier for electronics companies, this year for $2.5B.
Merck, founded in 1668, pulled in 58% of its revenue from pharmaceuticals last year, while chemicals accounted for 39%. They make liquid crystals that are used in flat-screen televisions as well as lab equipment and chemicals. Merck acquired Sereno, a Swiss biotechnology company, way back in 2007, but hasn’t had a major new drug approved since 2003.
In a telephone interview, Ulrich Huwald, analyst at Warburg Research in Hamburg, said, “Today’s deal shows the family is committed to a conglomerate structure in which all the branches of the company get investment funding. After last week you can’t question the future of Serono.”
According to Merck, shareholders will vote on the transaction, and the deal is expected to close in 2015. This will trump the purchase of Sereno, which was valued at approximately $13.5B at the time of the transaction.
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