Merck to Expand Life Sciences With $17B Deal for Sigma-Aldrich

NEW YORK (The Deal) -- German pharmaceuticals and chemicals company Merck ( MRK)  on Monday claimed to have made a "quantum leap" in its life sciences business after striking a $17 billion deal to buy Sigma-Aldrich ( SIAL) , of St Louis.

The Darmstadt, Germany-based buyer has agreed to pay $140 per share for Sigma-Aldrich, or 37% more than Friday's close in its biggest ever takeover. Merck said the deal will immediately boost Ebitda margins and within three years of closing should generate 260 million euros ($333.8 million) of annual savings and revenue benefits.

The addition of Sigma-Aldrich would have lifted Merck's life sciences revenue by 79% to 4.7 billion euros, based on fiscal 2013 figures, and Ebitda before one-time items by 139% to 1.5 billion euros, Merck said.

In a statement, Merck Chairman Karl-Ludwig Kley said the fusion "will secure stable growth and profitability in an industry that is driven by trends such as the globalization of research and manufacturing. What's more, the combination gives us the possibility to invest even more in innovation going forward."

Sigma-Aldrich is led by President and CEO Rakesh Sachdev and counts State Farm Insurance Cos. as its largest shareholder, with 11.8%, according to its web site.

The buyer said it's already arranged bridge financing, and expects the eventual financing structure to be a mix of cash, bank loans and bonds.

It expects to close the transaction around the middle of next year.

Advisers on the deal include Guggenheim Securities and JPMorgan & Co. for Merck, which is taking legal advice from a Skadden, Arps, Slate, Meagher & Flom LLP team led by Peter Atkins, Hilary Foulkes and Neil Stronski.

Morgan Stanley and Sidley Austin LLP's Tom Cole and Scott Williams are advising Sigma-Aldrich.

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