Versum Dumps Merck’s Acquisition Bid, Will Stick With Entegris

Versum Materials, Inc., a global specialty materials company based in Arizona, has seemingly brushed aside an unsolicited bid by Germany’s Merck KGaA to acquire it for $5.9 billion (excluding debt) or $48.00 per share in an all-cash deal.

Versum said it will stick to the deal it’s made with Merck rival, Entegris, Inc., a Massachusetts-based firm whose products and systems purify, protect, and transport critical materials used in the semiconductor device fabrication process. In January 2019, Versum and Integris entered into a $4 billion all-stock deal, saying both wanted to create a big chemical supplier to the semiconductor market at a time when the industry is under pressure.

In a statement to media, Versum said it “continues to believe in the strategic and financial rationale of the proposed merger of equals with Entegris.”

It did add a caveat, however. Versum said that consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, “Versum’s Board of Directors will thoroughly review the Merck proposal.”

Entegris CEO Bertrand Loy earlier said the combination with Versum “is highly complementary and strategically compelling.”

Merck made a case for its unsolicited bid, saying it wasn’t undervaluing Versum.

“The transaction that Versum recently disclosed (with Entegris) significantly undervalues Versum,” said Merck CEO Stefan Oschmann in a letter to Versum’s board of directors.

“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.”

Merck made the unsolicited bid in an attempt to boost its growing electrochemical operations. The German conglomerate is expanding Performance Materials, which is its high-tech unit catering to the electronics industry.

The acquisition of Versum will also complement Merck’s shrinking liquid crystals display (LCD) business, which used to enjoy income margins of up to 50 percent but is now being battered by severe competition from cheaper Chinese rivals.

Merck expects Performance Materials to return to growth in 2020 due to restructuring measures, among which is the failed bid for Versum. This restructuring has seen Merck acquire Britain’s AZ Electronic Materials for $2.2 billion in 2014.