Stock Spinoffs

Versum Jilts Entegris At The Altar, Runs Off With Merck KGaA

When last we left Versum(VSM), the Air Products(APD) spinoff was insisting it was sticking by its merger agreement with Entegris(ENTG), come Hell or high water. Versum had dismissed Merck KGaA’s(MKKGY) all cash $48 a share bid, and Merck was preparing to go hostile. Fast forward a month, and the hostilities have ended with Versum firmly in Merck’s arms and Entegris left with a $140 million termination payment.

Merck had begun efforts towards a hostile takeover but its raised bid of $53 in cash for each share of Versum stock has been determined by Versum’s Board to constitute a “Superior Proposal”. Versum terminated its agreement with Entergis and entered into a definitive agreement with Merck. The transaction is expected to close in the second half of 2019.

The agreed upon price reflects an enterprise value (EV) for Versum of approximately €5.8 billion, implying an EV/2019 EBITDA multiple of approximately 13.7x based upon consensus estimates and a pro-forma multiple of 11.6x including €75 million of identified annual run-rate cost synergies. The business combination is expected to be immediately accretive to earnings per share pre (EPS pre) and accretive to reported EPS in the third full year after closing.

Versum ultimately determined that this cash offer gave more certain value to its shareholders than the stock offer from Entegris.

Seifi Ghasemi, Chairman of Versum, said: “The Merck-Versum transaction offers compelling and certain value for our shareholders and will provide long-term benefits for our customers and employees. This exciting business combination will create increased scale, product and service depth, enhanced global presence, strengthened supply chain and combined R&D capabilities, driving leading innovation. We look forward to joining together our respective businesses and talented teams.”

As a result of the termination of the agreement, Entegris received a $140 million termination payment from Versum.

Entegris, Inc., a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, today confirmed that Versum Materials (“Versum”) has terminated the previously announced merger agreement with Entegris. As a result, Entegris has received a $140 million termination fee from Versum.

“Looking ahead, Entegris is well positioned for sustainable growth and shareholder value creation,” said Bertrand Loy, president and CEO of Entegris. “As always, we remain focused on executing on our strategic plan and providing our customers with exceptional solutions to help them achieve higher yields and enhanced levels of performance and reliability.”

Entegris certainly would have preferred the transaction go through, but at least it got the $140 million consolation prize.  Its prospects continue to be bright and investors might do well to take a deeper look. Entegris stock has risen steadily this year, up over 10% since the beginning of April and over 30% since the start of the year. This movement continued unabated through the termination of this merger agreement.

Disclosure: The author holds no position in any stock mentioned

 

 

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