Merck sells VWR for $1.68 billion

03/01/2004

By Mark DeSorbo

DARMSTADT, Germany—In a move designed to allow greater focus on its core businesses of pharmaceuticals and chemicals, Merck KgaAa has sold its cleanroom and contamination-control product distribution business, VWR International, for $1.68 billion to a private equity firm.

"This cash infusion will make Merck [maker of Zocor and Vioxx ] almost free of financial debt and give it the flexibility to expand is core businesses if opportunities should arise," says Bernhard Scheuble, Merck's chief executive officer.

Scheuble adds that selling VWR to Clayton, Dubilier & Rice Inc. (New York City) is the best solution for shareholders, for Merck, and "for the growth prospects for VWR and its employees."

As part of the agreement, VWR will continue to distribute Merck's laboratory products. Effective April 1, 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 nearly 5,900 employees and annual sales of approximately $3.1 billion, the West Chester, Penn.-based VWR distributes more than 750,000 products ranging from test tubes to fully equipped laboratory cleanrooms and biologic materials for drug development.

Thomas C. Franco, a spokesman for Clayton, Dubilier and Rice, told CleanRooms that Merck first announced in March 2000 that it intended to sell a minority stake in VWR in about two years through a sale or an initial public offering. By 2002, however, the IPO market was out of favor with investors and Merck began exploring other avenues to unlock its investment in its non-core distribution business

"VWR has been a non-core business of Merck, the transaction will not have any impact, and VWR will continue to do what it does—and do it well and grow, Franco says.

Asked what Clayton, Dubilier and Rice had planned for VWR, Franco explained that firm's modus operandi is to grow businesses within its portfolio, which until recently included Kinkos, over a three to seven year period.

"They invested in Kinkos in 1995 and tripled the profitability, and sold it to FedEx for a billion-dollar gain just last week," Franco adds. "They are transitional investors, for sure, and they think VWR could be an outstanding, publicly traded company some day."