Merck may have overpaid for Millipore: analysts

Merck, based in Darmstadt, will pay US$107 a share in cash for Millipore, 50 percent above the closing price Feb. 19. That was the last day of trading before Bloomberg News reported that Millipore had received a takeover bid from Thermo Fisher Scientific Inc. The purchase, announced Feb. 28, will give Merck a more profitable business after its drug unit had setbacks on the Erbitux cancer treatment and a multiple sclerosis pill.

Still, the price is so high that Merck's return on the investment will be less than the cost of the financing to fund the deal, according to Sachin Jain, an analyst at Bank of America Merrill Lynch. Merck last week said earnings this year will increase less than analysts had estimated and proposed a 33 percent reduction in the dividend.

“The deal appears expensive and we have the impression that investors would have preferred an enhancement of the pharma segment and now might interpret the acquisition at that price as a defensive move,” Peter Duellmann, an analyst for Sal. Oppenheim Jr. & Cie. in Cologne, wrote in a report Monday. He has a “buy” rating on Merck.

Merck rose 1.70 euros, or 2.9 percent, to close at 59.50 euros Monday in Frankfurt.

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