Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Sigma-Aldrich Corporation (NASDAQ: SIAL) are up over 30% today after the German drug company Merck KGaA agreed to buy the life sciences company for a reported $17 billion. The deal will boost Merck's chemical and lab equipment offerings.
In an all-cash deal, Merck is paying $140 per share for the St. Louis-based biotech, or a 37% premium compared to Sigma's closing price last Friday. The deal is expected to close by mid-2015.
So what: This deal will immediately impact Merck's top-line, given that Sigma's earnings are expected to grow by nearly 7% on average for the next 5 years . Merck will also increase its global footprint through this merger, especially in Asia and North America.
Perhaps most importantly, this acquisition further removes the company away from its struggling pharma pipeline, as its Serono biotechnology segment hasn't been able to produce a significant new drug in over a decade due to a spate of high profile clinical failures .
Now what: Healthcare companies are continuing to make big splashes on the M&A front and today's multi-billion deal is proof positive that these companies are thinking big in the search for "bolt-on" acquisitions. In one fell swoop, Merck of Germany was able to substantially increase its chemical assets and start to move past the ill-fated acquisition of Serono. Given the need for several other large health care companies to do the same, I think similar deals will be made before year's end.
