Germany’s Merck KgaA agreed to pay $7.2 billion for lab supplier Millipore on March 1, shutting out Thermo Fisher Scientific's $6 billion bid for the company and surprising analysts who saw a good fit between Thermo and Millipore. Merck will pay $107 per share for Millipore, nearly a 50 percent premium to the cost of Millipore's shares before takeover speculation took hold. Both company's boards have approved the transaction, which will result in Millipore becoming a Merck subsidiary.

 

Merck's decision to buy Millipore is indicative of the pressures facing pharmaceutical companies to diversify their revenue streams as top-selling drugs fall off-patent. For Merck, the integration of Millipore offers a shoring up of stable revenues that might help smooth the cost of surprises, like the European rejection of Erbitux for treating lung cancer last year.

 

“By combining Millipore’s bioscience and bioprocess knowledge with our own expertise in serving pharma customers, we will be able to unlock value in our chemicals business and transform it into a strong growth driver for Merck," says Karl-Ludwig Kley, Merck's executive chairman.

 

Merck expects that the combined business will generate annual "cost synergies" of about $100 million within three years of the transaction's close. Millipore’s headquarters in Billerica, Massachusetts will be combined with Merck’s U.S. chemicals headquarters.

 

Just days before the March 1 sale, Millipore's board said it had retained Goldman Sachs to explore a possible merger or sale of the company but had not set a timeframe for such a transaction.