Merck bids for Air Products spinoff
German chemical giant makes cash offer for Versum Materials
German pharmaceutical and chemical giant Merck has made an offer to acquire electronic materials company Versum Materials for more than $5 billion.
The proposal Wednesday morning comes less than a month after Versum, an Air Products spinoff with about 500 employees in the Lehigh Valley region, announced a $9 billion merger with Massachusetts chemical company Entegris.
In a letter to Versum's board of directors, Merck CEO and board Chairman Stefan Oschmann offered to acquire Versum for $48 per share in cash, about 16 percent more than what the Arizona company's stock was going for Tuesday evening ($41.40).
The offer represents a 52 percent premium to Versum's market value before the Entegris merger announcement. Oschmann said Merck has “long been impressed” with Versum's potential and thinks the Entegris deal “significantly undervalues” the company.
“Instead of the speculative value offered by the Entegris transaction, the all-cash proposal would deliver immediate and certain cash value to Versum stockholders and employees, shielding them from the significant integration, operational and market risks posed by the allstock Entegris transaction,” Oschmann wrote to the Versum board.
Seifi Ghasemi, president and CEO of Air Products, serves as chairman of the Versum board. The Entegris deal calls for Ghasemi to lead the combined board following the merger.
In a company statement, Versum called Merck's proposal “unsolicited.”
“Versum continues to believe in the strategic and financial rationale of the proposed merger of equals with Entegris,” the statement reads. “Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisers, Versum's board of directors will thoroughly review the Merck proposal.”
Under the terms of the Entegris agreement, which was unanimously approved by both companies' board of directors, Versum stockholders will receive 1.12 shares of Entegris for each Versum share. After the merger, Entegris stockholders will own 52.5 percent and Versum Materials stockholders will own 47.5 percent of the combined company.
According to a Jan. 29 SEC filing, Versum would have to pay $140 million to Entegris to terminate their merger deal.
Versum, which was spun off from Air Products in October 2016, develops specialty materials and chemical processes on which semiconductor manufacturers
rely to improve electronic speed and reliability.
Its main Lehigh Valley office is on Vultee Street in south Allentown. In April it opened a $20 million research and development technology center at its Rush Township, Schuylkill County, campus, which is home to more Versum employees (about 250) than any of its other manufacturing facilities around the world.
The campus produces a variety of specialty gases and chemicals including nitrogen trifluoride, used to create clean plasma etching of silicon wafers, and tungsten hexafluoride, which the semiconductor industry uses to make thin films.
Versum had $1.4 billion in revenues in fiscal year 2018, a 20 percent jump over the previous year. It employs about 2,200 people worldwide.
Oschmann said Merck wants to strengthen its electronic materials operations in the United States, where the company already employs more than 10,000 people across 50 locations.
Acquiring Versum would “create a deep and complementary portfolio of electronic materials, equipment and services for the semiconductor and display industries,” Oschmann said in a news release.
Merck spends about $3 billion annually on research and development, and it believes the addition of Versum’s businesses would help “drive leading innovation supported by long-term tailwinds in the industry.”
Merck would maintain Versum’s headquarters in Tempe, Ariz., as the hub for its U.S. electronic materials business, according to its news release.
Versum’s stock closed Wednesday at $49.10, up 18.6 percent.