Merck Launches $5.9 Billion Hostile Takeover of Versum

In a move that might come as a surprise for many, the German pharmaceutical giant Merck KGaA has decided to further increase its hold over the semiconductor market and started a hostile takeover attempt over Versum Materials. The attempted takeover is believed to be entirely in cash, and the objective is to ensure that a rival does not get its hands on the semiconductor materials manufacturer. Versum has been a major player in the semiconductor materials industry for many years now, and it is interesting to note that the company has been working with American company Entregis over a merger.

The merger has apparently been agreed by both parties in principle, and according to reports, the merger is entirely made up of share swaps. However, Merck did not seem to let go of this opportunity and came up with an all-cash takeover plan back in January. That was knocked back by Versum, but now the German company has returned with a hostile takeover bid worth $5.9 billion. Although the offer has been rejected outright, Merck has now sent a letter to Versum shareholders and made it clear that a hostile takeover is now in play. In the letter to shareholders, the company stated,

The Versum board’s hasty rejection of our proposal and unwillingness to engage in discussions with us has forced us to take this proposal directly to shareholders.

Merck is one of the oldest companies in Germany, having been founded back in the 17th century and over the years; it has had its fair share of hostile takeovers. For instance, back in 2006, the company successfully completed a hostile takeover of German pharma company Schering in a deal that was worth 17 billion Euros. The offer made by Merck will stand until the 7th of June this year, and it is during this period that the company will need to corner more than 50% of Versum shareholding. According to Merck, financing of the deal would not be a problem since leading bank like BNP Paribas and Deutsche Bank have already committed their backing. In this light, it remains to be seen how the Versum shareholders react to the attempt. If this deal seems better than the one offered by Entregis, then Merck could find itself in a strong position. One shareholder said,

Now the burden shifts to the Versum board to explain with much greater clarity any objections they may have about this offer.

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