Cutting in on an Entegris Deal, Merck KGaA Makes $5.9 Billion Bid for Versum

chess pieces on top of blocks with letters 'M&A'

Topping an offer from Billerica, Massachusetts-based company Entegris, Merck KGaA, Darmstadt, Germany offered an unsolicited $5.9 billion to acquire Versum Materials.

Merck KGaA is offering $48 per share, or $5.2 billion excluding debt. This is a 16-percent premium on Tuesday’s closing price. Entegris’s offer in January was for $4 billion all-stock, whereas Merck’s is a cash offer.

Versum is based in Tempe, Arizona. It manufactures and markets materials used to manufacture semiconductors and other electronics.

In a letter to Versum’s board of directors, Merck KGaA chairman Stefan Oschmann wrote, “instead of the speculative value offered by the Entegris transaction, the all-cash proposal would deliver immediate and certain cash value to Versum stockholders and employees, shielding them from the significant integration, operational and market risks posed by the all-stock Entegris transaction.”

As of Wednesday, Versum indicated it believes the Entegris deal is both strategically and financially sound, but it would thoroughly review the Merck KGaA offer.

Merck KGaA, not to be confused with American company Merck & Co., which is known as MSD outside the U.S. and Canada, employs about 10,000 people at more than 50 sites in the U.S. Merck KGaA indicates it wants to strengthen its U.S. operations, particularly in its electronic materials operations.

In a recent filing with the U.S. Securities and Exchange Commission, Versum noted if the Entegris deal isn’t completed, it will have to pay $140 million.

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Versum spun off in 2016 after three decades as a division of Air Products & Chemicals. It has about 500 employees in Arizona and 2,300 staffers overall. It has 14 major facilities in Asia and North America. Versum in 2018 reported annual sales of approximately $1.4 billion.

In addition to its main office in the Lehigh Valley, in April 2018 it opened a $20 million research and development technology center at its campus in Schuylkill County.

The company produces specialty gases and chemicals, such as nitrogen trifluoride, which is used to create clean plasma etching of silicon wafers, and tungsten hexafluoride, used in semiconductors.

If it were to complete the merger with Entegris, the combined company’s headquarters would be in Billerica, Massachusetts. Versum is ranked in the 20 most valuable Arizona-based corporations.

If Versum were to go with Merck KGaA, it would be part of a company that brought in about $15.4 billion in the last four quarters and has pharmaceuticals, life science, and performance materials such as the liquid crystals used for flat-screen TVs. It would have access to a much larger market for a portfolio of electronic materials, equipment and services for semiconductors and displays. Merck KGaA spends about $3 billion on R&D annually and says that adding Versum’s businesses would help “drive leading innovation supported by long-term tailwinds in the industry.”

Merck KGaA indicated that it would maintain Versum’s site in Arizona as “the major hub for the combined electronic-materials business in the U.S.”

In the U.S., Merck KGaA acquired Millipore in 2010 and Sigma-Aldrich in 2015. If Versum accepts the bid, Merck KGaA indicates it believes it could close the deal in the second half of this year.

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