Chemical Buy-Out

"This transaction is very attractive to shareholders, customers and employees of both companies," Merck executive board chairman Karl-Ludwig Kley said in a statement relating to the 5.3 billion Euros ($7.2 billion) deal.

The agreement paves the way for Merck, which besides its pharmaceutical activities is the largest maker of chemicals used in the manufacture of flat-panel displays, to gain ground in the field of biotech research equipment.

The family-controlled, Darmstadt-based business, which started as a 17th century pharmacy, is now best known for its cancer and multiple sclerosis treatment drugs, as well as the production of liquid crystal displays for computer and television monitors. But is not happy to stop there.

If the glove fits…

Kley described the union with Massachusetts-based Millipore, which produces filters and purifiers used in the making of biotechnology drugs, as "an excellent strategic fit."

He said it would allow Merck to "cover the entire value chain for our pharma and biopharma customers, offering integrated solutions beyond chemicals."

The acquisition, which although approved by both companies' boards has yet to be endorsed by Millipore shareholders, would increase Merck's revenue from its chemical activities by ten percent, taking it to a total of 35 percent.

The right time

Analysts say it is perfect timing for Merck, which suffered a set-back when a scientific committee of the European Medicines Agency rejected the company's lung-cancer drug Erbitux, thereby reducing potential sales of the product.

But the Darmstadt-based company was not the only one with an eye on Millipore. Last week the biotech equipment maker was reported to have received a 4.4 billion Euro buy-out offer by rival US comapany Thermo Fisher.

Millipore, which turned a profit of some 1.2 billion Euros last year, responded to the bid by hiring Goldman Sachs to help it weight up its options, insisting that it had "no definitive time-table" for any sale or merger.

Uneasy markets

But Merck's offer of 79 Euros per share, to be financed with available cash and a loan, was enough to sway Millipore. Markets, however, responded reluctantly to the news, with Merck shares falling 1.1 percent to 57.19 Euros on Monday morning.

Analysts blame the dip on the relatively high share price, but say Merck's move is strategically positive.

The German company, which hopes to complete the purchase later this year, says it will keep Millipore's headquarters in Massachusetts, retain its senior level of management and merge it with Merck's U.S. chemicals headquarters.

tkw/AP/reuters/AFP
Editor: Andreas Illmer