Merck KgaA Sells VWR International to CDR for $1.68 Billion

Strategic Insights -

Merck KgaA, a leading German pharmaceuticals group, has made significant strides in reducing its debt by agreeing to sell its VWR International laboratory equipment unit to private equity house Clayton, Dubilier & Rice Inc. for $1.68 billion. The sale, which is expected to result in $240 million in profit for Merck, marks the company's second major divestiture in two months as part of its focus on oncology medications. With VWR accounting for about a third of Merck's sales, the sale will allow the company to continue distributing its products through a long-term agreement.

Key Takeaways:

  • Merck KgaA has agreed to sell VWR International to Clayton, Dubilier & Rice Inc. for $1.68 billion, with the sale expected to result in $240 million in profit for Merck.
  • The sale marks Merck's second major divestiture in two months as part of its focus on oncology medications, following the sale of its 50% stake in orthopedic joint venture Biomet for $300 million.
  • VWR International has annual sales of €2.4 billion ($3.1 billion) and employs 5,880 people, accounting for about a third of Merck's sales.
  • The sale will allow Merck to continue distributing its products through a long-term agreement with CDR.
  • Analysts have universally welcomed the move, citing the company's ability to jettison a low-margin business while freeing up cash for future purchases.
  • Merck's CEO, Bernhard Scheuble, has stated that the company is actively seeking acquisitions to support its oncology push.
  • The sale is subject to regulatory approval and marks CDR's third major divestiture acquisition in recent months, following its sale of Kinko's for $2.4 billion.

Statistics:

  • €2.4 billion ($3.1 billion): Annual sales of VWR International.
  • 5,880: Number of employees at VWR International.
  • $1.68 billion: Purchase price for VWR International by CDR.
  • $240 million: Expected profit for Merck from the sale of VWR International.
  • €957 million: Valuation of VWR International by Bankgesellschaft Berlin analyst Christian Orquera.
  • 30%: Percentage of Merck's sales generated by VWR International.
  • $70 million: Profit made by Merck from the sale of its 50% stake in Biomet.
  • €7.2 billion: Sales revenue of Merck in 2003, with operating profit declining by 3.8% to €538 million.

Sources:

  • "Merck Agrees to Sell VWR International to CDR for $1.68 Billion" (The Deal, February 16, 2004)
  • "Merck KgaA to Sell VWR International" (www.TheDeal.com)
  • "Merck Announces Earnings Exceeding Analysts' Expectations" (www.TheDeal.com)