To sideline a rival bidder and to force shareholders to consider a merger, German pharmaceutical group Merck KGaA has issued a hostile offer of US$5.9 billion to acquire Versum Materials. The offer, which was announced this week, was a drastic move by Merck to expand its presence in the semiconductor materials market.
Merck's offer to takeover Versum is quite substantial when compared to the offer made by US-rival Entergis. Merck's acquisition offer pegs each share at around US$48, which is larger than the US$39.20 worth of Entergis stock for every Versum share. Entergis is currently trading at US$35 per share, which makes it all the more appealing for stockholders to consider Merck's offer.
However, Versum has publicly opposed Merck's unsolicited cash offer and announced that it was still committed to its all-share deal with Entegris. Merck immediately responded and mentioned that the Versum's board was too hasty in their decision to reject their proposal. Merck also stated that because the board was unwilling to engage in further discussion to hammer out a deal, they have now been forced to take the offer directly to the company's shareholders.
The hostile takeover attempt marks the first of its kind since the company attempted to take over Berlin-based pharmaceutical firm Schering AG in 2006. The company was not successful in their attempts as Schering was eventually bought out by Bayer for US$19.14 billion.
According to Merck, their offer will be valid until the first week of June this year. The company also stated that the offer would be conditional and that they would have to win over the majority of the investors who are holding Versum shares. To back up their acquisition, Merck revealed that they already have the financial commitment of several firms including the Bank of America Merril Lynch, Deutsche Bank, and BNP Paribas Fortis.
Given Merck's hostile offer, there can now be only a limited number of options on the table for the parties involved. Entegris could respond to the bid with an increased offer or it could walk away from the deal with Versum. On the other hand, Versum's board will have to justify to shareholders why it should go with the Entegris deal. If it is not successful with this endeavor, the company will likely have to consider Merck's offer with a formal position to be determined before the offer expires.
Versum stock prices closed with a 0.5 percent increase following speculations of a higher bid from Entegris. Meanwhile, Merck shares rose up to 0.7 percent, with reports of its creation of a new high-tech chemicals division called Performance Materials.
