Merck KGaA and Clayton, Dubilier & Rice, Inc., a leading global private equity firm, have entered into a stock purchase agreement whereby a fund managed by Clayton, Dubilier & Rice will buy 100 per cent of Merck's laboratory distribution business, VWR International, for US$1.68 billion. The agreement is subject to regulatory approval and closing of the transaction will take place after all necessary approvals have been granted.
As part of the agreement, VWR will continue to distribute Merck's laboratory products. For that purpose, effective April 1, 2004, Merck will combine its Analytics & Reagents and Life Science Products divisions into a new Life Science & Analytics division. This division will enter into a long-term distribution agreement with VWR.
With 5,880 employees and annual sales of approximately EUR 2.4 billion, the West Chester, Pennsylvania-based company is one of the world's leading distributors of laboratory products. VWR's 750,000 products range from test tubes to fully equipped laboratory clean rooms and biologic materials for drug development.
"The sale of VWR will give Merck much better margins and allow it to better focus on its core businesses of pharmaceuticals and chemicals," said Merck CEO Bernhard Scheuble. "This cash infusion will make Merck almost free of financial debt and give it the flexibility to expand its core businesses if opportunities should arise. We believe that selling to a financial investor at this price is the best solution for our shareholders, for Merck, and for the growth prospects of VWR and its employees."
"VWR International is a very high quality business and the transaction is precisely the kind for which we are well known - a large divestiture of a captive distributor from a major multinational corporation," said Joseph Rice, chairman of Clayton, Dubilier & Rice. "We believe our operationally focused investment model is particularly well suited in situations where the parent organization has a strong interest in seeing the unit being divested grow and prosper as an independent company."
The Laboratory Distribution business accounted for 33 per cent of the Merck Group sales in 2003 and 11 per cent of its operating result. VWR's sales in 2003 declined 11 per cent when calculated in euros but rose 1.4 per cent when adjusted for currency effects. Two-thirds of VWR sales are generated in North America. VWR's operating result for 2003 declined 6.1 per cent to EUR 79 million resulting in a Return on Sales (ROS) of 3.3 per cent compared to 3.1 per cent in 2002. VWR's CEO Walter Zywottek and his management team have agreed to remain with VWR.