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Business planning

Merck Sells VWR to Clayton Dubilier & Rice for $1.65 Billion

Strategic Insights

— 2 min read

German drugs and chemicals group Merck has sold its laboratory equipment distributor, VWR, to a US buy-out group for $1.65 billion, offloading the unit four years after it was earmarked for sale. The sale leaves Merck debt-free and with a sharper focus on its higher-margin pharmaceuticals and chemicals businesses. VWR, based in West Chester, Pennsylvania, generates two-thirds of its annual $2.8 billion sales in the US, with Europe, led by Germany, making up the rest. The sale reduces Merck's sales by a third and operating profit by 11 per cent, but the company expects net profits "significantly above" those in 2003 and rising sales at its remaining pharmaceuticals and chemicals business.

Key Takeaways:

  • Merck sold VWR to Clayton Dubilier & Rice for $1.65 billion, offloading the unit four years after it was earmarked for sale.
  • The sale leaves Merck debt-free and with a sharper focus on its higher-margin pharmaceuticals and chemicals businesses.
  • VWR, based in West Chester, Pennsylvania, generates two-thirds of its annual $2.8 billion sales in the US, with Europe, led by Germany, making up the rest.
  • The sale reduces Merck's sales by a third and operating profit by 11 per cent.
  • CD&R's chairman, Joe Rice, said the buy-out group paid a nine times earnings before interest, taxation, depreciation, and amortisation multiple for VWR.
  • CD&R will pay $630 million to finance the equity part of the deal, a large exposure given that it could account for up to 18 per cent of CD&R's $3.5 billion Fund VI.
  • The VWR sale follows Merck's $300 million sale in December of a stake in an orthopaedics joint venture, leaving the group nearly debt-free for the first time in 50 years.
  • Merck's fourth-quarter sales slipped slightly from a year earlier to €1.81 billion, but a 23 per cent rise to €183 million in its operating profit beat analysts' expectations.
  • The company expects net profits "significantly above" those in 2003 and rising sales at its remaining pharmaceuticals and chemicals business.

Statistics:

  • Merck's sales: $1.65 billion (VWR sale) / 3.5 billion (Fund VI exposure)
  • VWR sales: $2.8 billion (annual sales)
  • VWR sales by region: $1.87 billion (US) / $950 million (Europe)
  • Merck's fourth-quarter sales: €1.81 billion
  • Merck's fourth-quarter operating profit: €183 million (23% rise)
  • Merck's debt: $0 (debt-free)
  • CD&R's Fund VI exposure: $630 million (equity part of the deal)
  • CD&R's typical investment size: $300m-$400m

Sources:

  • "Merck sells VWR to US buy-out group" by Peter Smith and Bettina Wassener, Financial Times, (date not specified)
  • "Merck sells laboratory equipment business" by the associated press, (date not specified)

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