March 5, 2019 / 11:52 AM / in 18 days

Merck KGaA urges Versum shareholders to support takeover bid

FRANKFURT (Reuters) - Germany’s Merck KGaA on Tuesday called on shareholders of Versum Materials to put pressure on the electronic materials maker’s management to consider its jilted takeover proposal over a rival offer.

A logo of drugs and chemicals group Merck KGaA is pictured in Darmstadt, Germany January 28, 2016. REUTERS/Ralph Orlowski

Versum, the former specialty chemicals division of industrial gases group Air Products, on Friday rejected Merck’s unsolicited cash offer worth $5.9 billion. The proposal made to the management was non-binding and has not yet been put to shareholders.

Versum said it was committed to a no-cash merger with U.S. rival Entegris agreed in January.

“We urge you to let the Versum Board know that Versum shareholders will not support the Entegris acquisition in light of our proposal, which is unquestionably superior,” Merck said in an open letter to Versum investors.

“Our offer to engage directly with Versum to understand the rationale for the Versum Board’s determination has not been accepted,” it added.

Versum officials were not immediately available for comment.

Entegris offered in January to acquire Versum in an agreed all-stock deal which valued Versum’s equity at about $4 billion at the time. The pairing would create a sizeable chemical supplier to the semiconductor market at a time when the industry is under pressure.

Merck’s takeover proposal of $48 per share in cash compares with an offer price of around $41 worth of Entegris stock per Versum share under the existing deal, based on Entegris’ closing price of $36.61 on Monday.

One Versum investor, speaking on condition of anonymity, said Merck would have to give shareholders more assurance if it wanted to supplant an agreed deal.

“There’s an existing template how both Versum and Entegris must act. For Merck, there are no rules unless they put a fully financed tender offer down on the table,” the U.S.-based investor said.

He also questioned whether Merck’s 17 percent premium over the implied Entegris offer would justify missing out on the future stock market potential of a Versum-Entegris tie-up.

A London-based Versum shareholder, who also asked not to be named, said there was no harm in talking to the new suitor.

“Them shutting the door clearly does not look like they are trying to get the best deal. They chose not to designate Merck a superior bidder, that seems unnecessary.”

Merck said its plan would keep Versum’s main Tempe, Arizona site as the hub for a combined electronic materials business in the United States.

“The premium valuation reflected in our proposal is certain and immediate, without any of the significant ongoing integration, operational or market risks reflected in the value of the Entegris stock consideration and without the need for the achievement of synergies,” Merck said.

Editing by Kirsten Donovan and Edmund Blair

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