Merck to acquire Sigma-Aldrich to enhance position in attractive life science industry

Merck KGaAMerck, a leading company for innovative and top-quality high-tech products in the pharmaceutical, chemical and life science sectors, and Sigma-Aldrich today announced that they have entered into a definitive agreement under which Merck will acquire Sigma-Aldrich for $17.0 billion (€13.1 billion), establishing one of the leading players in the $130 billion global life science industry.

Merck will acquire all of the outstanding shares of Sigma-Aldrich for $140 per share in cash. The agreed price represents a 37% premium to the latest closing price of $102.37 on September 19, 2014, and a 36% premium to the one-month average closing price. The transaction is expected to be immediately accretive to Merck's EPS pre and EBITDA margin. Merck expects to achieve annual synergies of approximately €260 million (approximately $340 million), which should be fully realized within three years after closing.

"This transaction marks a milestone on our transformation journey aimed at turning our three businesses into sustainable growth platforms," said Karl-Ludwig Kley, Chairman of Merck's Executive Board. "For our life science business it's even more than that: it's a quantum leap. In one of the world's key industries two companies that fit perfectly together have found each other to present a much broader product offering to our global customers in research, pharma and biopharma manufacturing and diagnostic and testing labs. As such, the combination of Merck and Sigma-Aldrich 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. We are delighted to make this compelling proposition to Sigma-Aldrich's shareholders, who will obtain full and certain cash value for their shares."

Rakesh Sachdev, President and Chief Executive Officer of Sigma-Aldrich, said, "We are excited to join forces with Merck, a distinguished industry leader. The combined company will be well-positioned to deliver significant customer benefits, including a broader, complementary range of products and capabilities, greater investment in breakthrough innovations, enhanced customer service, and a leading e-commerce and distribution platform in the industry. This transaction is a clear validation of our success in transforming Sigma-Aldrich into a customer-focused and solutions-oriented global organization. This is a testament to the strength of the Sigma-Aldrich brand and the accomplishments of our 9,000 employees worldwide. We believe this is a very positive outcome for our shareholders, who will receive a significant premium, and our employees, who will benefit from enhanced opportunities as part of a larger, more global organization."

The combined company will be able to serve life science customers around the world with a highly attractive set of established brands and an efficient supply chain that can support the delivery of more than 300,000 products. In the Laboratory & Academia business, together Merck Millipore and Sigma-Aldrich will offer their customers a complementary range of products across laboratory chemicals, biologics and reagents. In pharma and biopharma production, Sigma-Aldrich will complement Merck Millipore's existing products and capabilities with additions along the entire value chain of drug production and validation.

Shaped over almost 350 years by a family of owners, Merck today is known as a successful and values-driven business and a well-respected employer in the life science industry. With a common focus on employees, customers and communities, the combination represents a strong operational and cultural fit. Merck has great respect for Sigma-Aldrich's rich history, customer-centric culture and commitment to corporate social responsibility and believes that the combination will afford new opportunities to employees at both companies. Merck plans to maintain a significant presence in St. Louis, and in Billerica, following completion of the transaction, as well as in important Merck Millipore sites such as Darmstadt and Molsheim, France.

Merck has successfully integrated a number of life science businesses in recent years, evaluating each company and combining the strongest operations, most efficient processes and most innovative programs that best support the future growth of the combined company. Merck intends to apply the same principles to the acquisition of Sigma-Aldrich in order to ensure a seamless integration. An integration team, which will include representatives from both companies, will be established to oversee and facilitate the integration process.

The combined life science business will have solid growth potential, strong and sustainable cash flow, and meaningful efficiency potential on an operational level. Based on fiscal year 2013 financials, the business would have had combined sales of €4.7 billion ($6.1 billion), an increase of 79% and combined EBITDA pre (earnings before interest, taxes, depreciation and amortization before one-time items) of €1.5 billion ($2.0 billion), which is an increase of 139%. Merck Group's sales would have increased by approximately 19%. For the same period, the acquisition would have increased Merck Group's EBITDA pre by approximately 24% and improved Group EBITDA pre margin from approximately 30% to approximately 33% including expected synergies.

The transaction has been unanimously approved by Sigma-Aldrich's Board of Directors. A merger agreement will be presented to Sigma-Aldrich shareholders for approval at a special meeting of shareholders. The transaction has the full support of Merck's Executive Board and E. Merck KG including its Board of Partners, and a Merck shareholder vote will not be required.

Bridge financing has been secured for the all-cash transaction, and Merck expects the final financing structure will comprise a combination of cash on Merck's balance sheet, bank loans and bonds. Closing is expected in mid-year 2015, subject to regulatory approvals and other customary closing conditions.

Guggenheim Securities and J.P. Morgan are acting as financial advisers to Merck. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to Merck. Morgan Stanley & Co. LLC is acting as financial adviser to Sigma-Aldrich and Sidley Austin LLP is acting as legal adviser.

About Merck
Merck is a leading company for innovative and top-quality high-tech products in the pharmaceutical and chemical sectors. With its four divisions Merck Millipore, Merck Serono, Performance Materials and Consumer Health, Merck generated total revenues of € 11.1 billion in 2013. Around 39,000 Merck employees work in 66 countries to improve the quality of life for patients, to further the success of customers and to help meet global challenges. Merck is the world's oldest pharmaceutical and chemical company - since 1668, the company has stood for innovation, business success and responsible entrepreneurship. Holding an approximat ely 70 percent interest, the founding family remains the majority owner of the company to this day. Merck, Darmstadt, Germany is holding the global rights to the Merck name and brand. The only exceptions are Canada and the United States, where the company is known as Merck KGaA, Darmstadt, Germany.

About Sigma-Aldrich
Sigma-Aldrich, a leading Life Science and Technology company focused on enhancing human health and safety, manufactures and distributes more than 230,000 chemicals, biochemicals and other essential products to more than 1.4 million customers globally in research and applied labs as well as in industrial and commercial markets. With three distinct business units - Research, Applied and SAFC Commercial - Sigma-Aldrich is committed to enabling science to improve the quality of life. The Company operates in 37 countries, has approximately 9,000 employees worldwide and had sales of $2.7 billion in 2013.

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