NEW YORK (TheStreet) -- Germany's Merck KGaA has agreed to buy London-listed AZ Electronic Materials SA in a deal valuing the chemicals supplier to the electronics industry at £1.81 billion ($2.96 billion) including debt.
Merck will pay £1.57 billion for AZ's stock and assume £240 million of debt. The buyer said Thursday the deal will help it generate new formulations and products to meet the "increasingly shorter" life cycles in the electronics industry.
"Together with AZ's expertise in display technologies, Merck believes that its performance materials division will be in an even better position to develop future innovative solutions for its customers," the Darmstadt-based company said.
Family-controlled Merck is already the world's largest producer of liquid display crystals but is probably better known for its cancer drugs and laboratory equipment.
Merck, which operates as EMD in the U.S. and Canada, said the acquisition will produce synergies of 25 million a year by 2016 and be accretive to earnings per share within the first full year after the offer closes. It also forecast 50 million of integration costs, which would be spread from 2014 to 2016.
Merck is offering 403.5 pence a share, a premium of 53% to AZ's closing price of 262.9 pence on Wednesday, 33% more than the weighted average price of 303.4 pence over the past six months.
AZ was floated at 240 pence a share in October 2010 by its former private equity ownersCarlyle GroupandVestar Capital Partners Inc.The company generated Ebitda of $262 million and profit before tax of $129.1 million on revenue of $793.9 million in 2012. However, its share price fell about 30% in April after issuing a profit warning prompted by a slowdown in its integrated circuit materials business.