Merck has agreed to buy AZ Electronic Materials for about £1.6 billion in cash to boost its offering of specialty chemicals to the electronics industry.

AZ stockholders will receive 403.5 pence for each share, the German drug and chemical company said in a statement today. The price is 53 per cent above the closing level yesterday in London trading.

The purchase of Luxembourg-based AZ would strengthen the industrial-materials unit that’s driven Merck’s sales growth in recent years as its pharmaceutical business struggles to develop new medicines.

Chief executive Karl-Ludwig Kley will add anti-reflective coatings used in hard-disc drives, specialty chemicals for the graphic-arts industry and shrink coatings used in the manufacturing of memory devices alongside the liquid crystals for flat-screen displays that Merck sells.

"Liquid crystals has always been the pearl, so it makes sense to me," said Fabian Wenner, an analyst with Kepler Cheuvreux in Zurich. Wenner expects Merck to make more acquisitions, he said.

Merck rose 4.9 per cent to close at €130.50 in Frankfurt, giving the company a market value of €28.4 billion. – Bloomberg