On Dec 30, 2014, Zacks Investment Research downgraded life sciences company Sigma-Aldrich Corporation (SIAL) to a Zacks Rank #4 (Sell).
Why the Downgrade?
Sigma-Aldrich, a life science and high technology company, is already set for a buyout by Merck KGaA (MKGAF). On Sep 22, 2014, the company announced that Merck KGaA has agreed to acquire it for $17 billion. Under the terms of the deal, Merck KGaA will buy all of the outstanding shares of Sigma-Aldrich for $140 per share in cash.
The transaction was waiting for antitrust clearance which Sigma-Aldrich recently received from the U.S. FTC. The U.S. antitrust clearance is subject to certain other conditions, including regulatory approval in additional jurisdictions. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) with regard to the proposed acquisition of Sigma-Aldrich expired on Dec 22, 2014, thereby completing the U.S. HSR Act antitrust notification and review requirement for its acquisition by Merck KGaA.
The company’s shares have also moved slowly to close at $137.23 in its last trading session. Moreover, Sigma-Aldrich is witnessing only a modest improvement in end markets, especially Pharma. Weak spending from major pharmaceutical and biotech customers will affect growth in Sigma’s Research segment.
Sigma-Aldrich also saw its profit slip in third-quarter 2014 as higher charges offset a rise in its top line in the quarter. Earnings for the quarter were in with the Zacks Consensus Estimate. Sales rose on healthy momentum in the company’s Applied division, but missed expectations. The company has not provided an outlook for 2014 due to its impending acquisition by Merck KGaA.
Other Stocks to Consider
Better-ranked companies in the specialty chemicals space include Rockwood Holdings, Inc. (ROC) and NL Industries Inc. (NL), both sporting a Zacks Rank #1 (Strong Buy).
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