Merck Reaches Agreement on Recommended Cash Offer for AZ Electronic Materials to Strengthen Performance Materials Division

Merck announced an agreement with the Board of Directors of AZ Electronic Materials regarding a recommended cash offer for the entire share capital of AZ to further expand Merck’s materials and specialty chemicals business by adding a globally leading premium supplier of high-tech materials for the electronics industry.

According to the terms of the agreement, Merck is offering GBpence 403.5 per share of AZ in cash, valuing AZ at around GBP 1.6 billion (around € 1.9 billion). The offer represents a premium of around 41% over the three-month volume-weighted average share price of AZ. The Board of Directors of AZ intends to recommend that the company’s shareholders accept the offer and the directors have irrevocably undertaken to tender their own shares (representing approximately 0.7% of the issued share capital of AZ). The acquisition will be 100% financed by existing cash resources.

The successful completion of the transaction is among others conditional upon antitrust clearance as well as a minimum acceptance level of 95% of the share capital.

“With this strategic move we are strengthening the portfolio of Merck by adding a premium business to our existing business of high-margin specialty chemicals,” said Karl-Ludwig Kley, chairman of the Executive Board of Merck. “The combination will enable Merck to access additional growth areas in the electronics industry to benefit even better from the increasing demand for electronic devices beyond displays. The proposed offer also marks another milestone in our transformation journey toward a highly specialized technology company offering tailor-made solutions to patients and customers.”

“For many years AZ has been recognized as one of the foremost leaders in high purity innovative materials for the high technology electronics market,” said AZ chairman John Whybrow. “As materials become increasingly important in the markets we serve, strong R&D capabilities and a broad base are needed to secure economies of scale and entry into new markets. The current strategic opportunity for AZ to combine with Merck is therefore compelling. AZ has strong market positions along with a focused product development capability: by combining with Merck, these two attributes will reinforce long term growth opportunities.”

With its high-quality, high-purity specialty chemical materials for the electronics industry, AZ in 2012 generated revenues of US $794 million ( 584 million) and operating profit (EBITDA) of US $262 million (€193 million). The IC Materials division, which produces process chemicals for the production of integrated circuits used in electronic devices such as computers, smart phones, mp3 players and games consoles, accounted for around 70% of last year’s revenue. The divisional EBITDA margin was around 41% in 2012.

The Optronics division, which produces light-sensitive materials, also known as photoresists, for the production of flat panel screens as well as silicon-chemistry based products for optoelectronics, accounted for around 30% of last year’s revenue, with an EBITDA margin of around 29%. AZ had around 1,100 employees at the end of 2012, with almost 60% of these located in Asia.