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By: Eric Volz | ecv5049@psu.edu | February 28, 2019
On February 27, 2019, Germany’s Merck (MKGY) offered a counter bid for Versum (VSM) of $5.9 billion all-cash to beat out Entegris’s $4 billion all stock deal. Merck offered $48 per share which is an approximate 16% premium over the close price on Tuesday. As a result of this counterbid Merck lost 4.2% on the day and their competitor, Entegris, fell 2.7%. Merck’s ability to finance this all cash deal comes from the $4.2 billion dollar deal they did with P&G for their consumer health unit in April of 2018. Versum is still unsure which deal to accept at this time, but they will be required to pay $140 million if its merger with Entegris is not completed.
Merck is confident that their deal will be accepted because the all cash aspect will provide immediate and certain value to the Versum stockholders. They also assured Versum that Entegris undervalued the company.
Merck plans to use Versum to help strengthen its Performance Materials segment that works in the electronics industry. They hope to achieve synergies of over $68 million annually and they are confident the deal will not see any regulatory issues in this acquisition.
In my opinion, this is not the best deal for Merck if they successfully acquire Versum. I feel that they have overvalued the company and I think their estimate for the returns on the investment is also too high. It appears that investors agree with me when looking at the -4.2% dip in price. Considering Merck is just getting into the Performance Materials segment, I think it was an overly bold move to outbid Entegris.
Sources:
https://finance.yahoo.com/m/d8c1bbbd-8904-31d5-93a0-b283050d2ffe/ss_merck-kgaa-offers-to-buy.html
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