Merck KGaA Signs Versum Buyout Deal; Entegris Receives Termination Payment

Versum Materials VSM has approved a "superior" buyout proposal from MERCK KGAA/S ADR MKKGY at $53 per share after backing out of a previously announced merger with Entegris Inc ENTG.

What Happened

The business combination received unanimous approval from the boards of the German pharmaceutical company and Versum, Merck said in a Friday press release.

The deal is expected to be immediately accretive to Merck's earnings per share and to generate 75 million euros ($84.9 million) in run-rate synergies by the third full year after closing, Merck said. 

Versum is a supplier of process chemicals, gases and semiconductor manufacturing equipment. Merck said the tie-up is projected to bolster its performance materials segment and create a leading electronic materials business targeting the semiconductor and display industries. 

Versum's Tempe, Arizona headquarters will be maintained as the major hub for the combined electronic materials business, Merck said.

Entegris said in a separate statement Friday that it has received a $140-million termination fee payment from Versum. 

Why It’s Important

The price of the Versum buyout reflects an enterprise value of about 5.8 billion euros for the company and implies an EV/2019 EBITDA multiple of approximately 13.7x, according to Friday's announcement. 

Merck said it's financing the transaction with cash and debt. 

Versum Chairman Seifi Ghasemi said the deal gives shareholders "compelling and certain value" and holds long-term benefits for customers and employees. 

"This exciting business combination will create increased scale, product and service depth, enhanced global presence, strengthened supply chain and combined R&D capabilities, driving leading innovation. We look forward to joining together our respective businesses and talented teams."

What's Next 

The buyout is projected to close in the second half of this year and is subject to Versum shareholder approval, as well as regulatory clearance and other customary closing provisions, Merck said. 

Over-the-counter Merck shares were falling by 1.95 percent to $21.93 at the time of publication Friday. Versum shares were trading up slightly at $51.95. Entegris shares were jumping by 2.79 percent to $40.37. 

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Photo by Merck via Wikimedia.