Merck splashes £1.6bn to buy AZ Electronic

AZ Electronic Materials, the company that makes chemical components for Apple’s iPad and other mobile devices, is set to fall into the hands of the Germans after its board recommended a £1.6 billion offer from Merck.

The 403.5p-a-share offer represented a 53 per cent premium to AZ’s price and the stock jumped above 400p in early trade.

Espirito Santo bank reckoned the cash offer from pharmaceuticals and chemicals giant Merck was a “fair price” and suggested “the probability of a counter-bid is low”, but analysts added it would not be a surprise if another bidder emerged.

AZ shares have been on a rollercoaster ride, slumping by more than a third from a peak of 410p in March 2013, before bouncing back thanks to Merck’s offer.

Chief executive Geoff Wild owns 835,000 shares, worth £3.4 million, and is in line for a further 940,000 shares, worth £3.7 million, in long-term awards that could vest following the takeover.

The London-listed company, which has its corporate office in Stockley Park, makes chemicals materials that are widely used in electronic devices, flat panel displays and light-emitting diodes.

Espirito Santo tipped firms such as Air Products, Air Liquide and Linde who “provide speciality materials in adjacent areas” as possible counter-bidders.

AZ only floated on the stock market in 2010. Chairman John Whybrow said there was a “compelling” rationale to become part of a bigger group as it looks to push down on costs and invest in research and development.

“As materials become increasingly important in the markets we serve, strong R&D capabilities and a broad base are needed to secure economies of scale and entry into new markets,” he said.

Karl-Ludwig Kley, Merck’s chief executive, said: “AZ complements our existing activities in the display industry by adding attractive electronics chemicals with a similar business model.”

Merck expects the merger to generate annualised synergies of €25 million (£xx million) by 2016 and the AZ directors intend to step down when the merger has completed.

Rothschild, Goldman Sachs and UBS are advising AZ. Bank of America Merrill Lynch is advising Merck.