Millipore (MIL), a developer and manufacturer of filters and membranes for use in the high-technology bioscience industry, has agreed to be acquired by Germany's Merck KGaA for $107 per share in cash.  (Merck KGaA is not related to the U.S. drug giant Merck & Co.)  The $7.2 billion transaction was approved by both boards of directors, but is pending shareholder and regulatory approvals.  Assuming the deal is approved by all relevant parties, it should be concluded in the second half of 2010.

This transaction comes on the heels of an approximately $6 billion offer from Thermo-Fisher Scientific for Millipore that was, obviously, rebuffed.  Martin Madaus, Chairman, President and CEO of Millipore explained in a press release that the Merck agreement was the “outcome of a thorough strategic review process…”  Both companies were equally glowing about the possibilities of the deal. 

Millipore stock obviously advanced on the news and is trading just below the $107 per share cash offer.  Since most market pundits, including Value Line, do not expect a competing bid because the price Merck KGaA is paying seems lofty, the shares of Millipore are unlikely to see an advance above the offer price. 

Looking beyond the stock, the company also has a convertible bond that is affected by this event.  The Millipore 3.75% convertible senior notes due in 2026 also advanced in price in response to the jump in the stock and now sits well above the $1,000 par price.

The notes, which are convertible into 11.0485 shares of MIL, can be sold to the company under the “fundamental change” provision defined in the prospectus governing the convertible debt. The company will pay par, $1,000 per note, plus any accrued and unpaid interest up to, but excluding, the purchase date.  This, however, is less than what one would receive from selling the convertible outright or taking advantage of the conversion feature of the bond and waiting for the deal to close.  Note that the conversion options of this bond are many and relatively complex, as they will not, in fact, result in 11.0485 shares of MIL but, instead, some mix of cash and, perhaps, but not necessarily, stock.