Merck KGaA’s pigment arm may soon be acquired by Global New Material International Holdings Ltd., a Chinese colorant producer. Talks are ongoing regarding a potential acquisition, according to people with knowledge of the matter.
According to the sources, the Hong Kong-listed Global New Material, which markets its pigments under the Chesir brand name, has offered a binding bid for the unit of Merck. They noted the Chinese company has been discussing financing options for the potential purchase. The sources chose to remain anonymous because the information is private.
The sources said the deal may value the pigments division at almost €1 billion ($1.1 billion).
In an exchange filing Friday Global New Material said that it was in discussions with an independent third party over the possible acquisition of businesses. The filing did not name any potential acquisition target. On Friday trading was halted, to resume at 1 pm local time, according to the filing.
Merck shares were up as high as 4.1% on Thursday, marking the largest intraday rise in over five months. At the close in Frankfurt, shares were up 1.2%, which would value the company at roughly €66.4 billion.
Global New Material is known for producing pearlescent pigments from materials such as synthetic mica. The pigments are used to create shiny pigments for industrial coatings, plastics, cosmetics, and automotive paints. Global New Material shares have risen 11% since the beginning of the year, valuing the pigment producer at $668 million.
According to the sources, talks are ongoing between the Chinese pigment manufacturer and the Darmstadt, Germany-based Merck, and it is still not certain the companies will reach a deal. Other businesses have expressed an interest in the pigment division, they noted.
In January Global New Material acquired an approximately 42% stake in the South Korean-based pigment producer CQV Co. for 85.9 billion won ($66 million). In a March statement the company noted it intended to continue to look for international acquisitions which could boost its competitiveness.
A potential deal for the Merck division would test the tolerance of European companies and governments to tolerate Chinese takeovers. There are about 750 employees who work at Merck’s Gernsheim site, the largest pigment production facility. German companies and worker’s unions tend to be sensitive to any moves which might risk local jobs or local industry.
On Wednesday Bloomberg News reported that Midea Group Co., of China, was forced to abandon its attempt to acquire Electrolux AB due to the Swedish home appliance manufacturer being unreceptive to the idea of being purchased by a Chinese company, which highlights the difficulties Chinese takeovers face in the European economy.
