Germany's Merck boosts life sciences business with $11 billion bet on Bio-Techne

By Christy Santhosh, Padmanabhan Ananthan and Bhanvi Satija

June 25 (Reuters) - German drugmaker Merck KGaA said on Thursday it would buy U.S. firm Bio-Techne for $11.3 billion, its biggest deal in more than a decade, betting on demand for complex drug research and manufacturing tools to grow its life sciences unit.

Shares of Bio-Techne jumped 19% to $70.33 after Merck's offer of $73 per share, implying a 24% premium to Bio-Techne's close on Wednesday. Merck KGaA shares rose nearly 5%.

The deal would expand Merck's footprint in areas of advanced biological research and cell and gene therapy, and reinforce the life sciences business as a primary driver of the company's growth.

Bio-Techne supplies research reagents, proteins, antibodies, analytical instruments and other tools that are widely used by scientists and drug developers.

Some analysts said the transaction was a strategic fit and that they did not expect significant regulatory hurdles.

Merck appears to be getting an attractive asset with strong long-term potential, despite current pressures in the research tools market, Leerink analyst Puneet Souda said in a note.

LOWER VALUATIONS OPEN DOOR

"We have to look into valuations, and here of course timing matters," Merck KGaA CEO Kai Beckmann told reporters on a call. On a separate call with analysts, he said the valuation at which it was acquiring Bio-Techne "wasn't possible two years ago," when demand for drug research was at an all-time high during the COVID pandemic.

The transaction marks CEO Beckmann's first major acquisition since taking over the role in May from Belén Garijo, who was known for steering several acquisitions, including Exelead and SpringWorks Therapeutics, to strengthen the company's positions in key categories.

The Bio-Techne takeover appears consistent with Garijo's strategy.

Last year, Garijo said the group has an "appetite for M&A" with a priority on life sciences and was scanning a wide pool of potential targets.

The Bio-Techne acquisition is Merck's largest deal since its $17 billion 2014 purchase of Sigma-Aldrich, which strengthened its research tools division.

Merck's Life Science CEO Jean-Charles Wirth said that Bio-Techne will bring scale with its catalog of consumables that include 6,000 proteins and 425,000 antibodies, making it a "big, big plus" for customers.

The deal will increase Merck's presence in high-growth areas of research tools, advanced therapies and precision diagnostics, which represent a $27 billion market opportunity, Wirth said.

The German company said it would fund the deal, which is expected to close in late 2026 or early 2027, through a combination of cash and debt. It had cash and cash equivalents of about 2.74 billion euros ($3.11 billion), as of March 31.

Merck expects to save about 140 million euros in costs three years after closing.

($1 = 0.8818 euros)

(Reporting by Danny Callaghan, Christy Santhosh, Padmanabhan Ananthan, Patricia Weiss in Frankfurt and Bhanvi Satija in London; Editing by Linda Pasquini and Shinjini Ganguli)