Initial thoughts on $11.3bn Bio-Techne acquisition

Research evidence excerpt

Initial thoughts on $11.3bn Bio-Techne acquisition

the market will 12/26E 7.76 7.92

12/27E 8.68 8.61

assume more based on the prior Merck playbook.

12/28E 9.60 9.45

What we learnt from the call: i) Merck is broadly comfortable with consensus TECH Matthew Weston, PhD

expectations for integration modelling purposes, ii) assume 4-5% cost of debt for the Analyst

matthew.weston@ubs.comdeal, iii) €140m annual cost synergies by Year 3 should be modelled as accruing linearly

+44-20-7567 4055

over the time period, iv) the company has not assumed revenue synergies but sees

significant potential for customer cross-sell and geographic expansion, v) the company Colin White, PhD

does not see any material overlap that could concern competition authorities, vi) the Analyst

colin.white@ubs.com

deal is dependent on customary closing conditions, including approval by TECH

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shareholders, vii) closing is expected late-2026 or early 2027E, viii) Merck's financial

commentary assumes full accounting of TECH share-based compensation costs which Dominic Lunn, CFA

will be included in the P&L under Merck's standards. ix) Wilson Wolf offers an exciting Analyst

dominic.lunn@ubs.com

option to enter CGT manufacturing with option to buy in 2028E based on 4.4x FY27

+44-20-7567 3621

sales, up to a maximum of $1bn. This will be accounted as an option under IFRS and fair

value assumption will be reflected in Merck's financials.

Valuation:

Our price target is set using a sum-of-the-parts methodology to reflect Merck's

conglomerate nature. We assume a 15% conglomerate discount to our SOTP.

Highlights (€m) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E

Revenues 20,993 21,156 21,101 21,046 22,097 23,297 24,551 25,900

EBIT (UBS) 4,869 4,927 4,950 4,722 5,176 5,611 6,097 6,613