Merck trims down again with electronic unit sale

Related tags Merck Merck kgaa Pharmaceutical drug

Merck KGaA is planning to sell its electronic chemicals business to
BASF for €270 million, freeing it up to focus on its
pharmaceutical, chemical and liquid crystal businesses.

In the first nine months of the year, sales of Merck's electronic chemicals unit were €155 million, a 16 per cent rise, but analysts have suggested that Merck would profit by selling the business and using the cash to develop its core activities. The latest disposal follows last year's sale of Merck's scientific supply unit VWR International for €1.3bn, which paid off Merck's debt position at a stroke.

In a research note, analysts at Goldman Sachs said the transaction was at a fair price and good for both parties. Merck should benefit from an improvement in margins and less exposure to cyclic markets, while BASF broadens its portfolio and creates a leading electronic chemicals presence.

Merck may also find the injection of funds useful for its own acquisition plans. Last year, faced with growing competition in the market for off-patent pharmaceuticals, the company bought Scandinavian generic drugs unit NM Pharma from Pfizer. At the time, Merck said it was interested in additional acquisitions, both in the pharma and chemical sectors.

The transaction, which is subject to antirust approval and expected to close in the second quarter, includes Merck Electronic Chemicals management, technology and production facilities in Asia and Europe. The unit has operated as a legally independent company wholly owned by Merck since 1 January, 2003.

Certain Merck employees in Darmstadt engaged in the production of electronic chemicals, will remain with Merck and continue to manufacture for BASF for the next three years. Overall, the electronic chemicals business has approximately 600 employees, who will transfer to BASF.

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