Merck KGaA is splashing out $17 billion not to strengthen its pharmaceuticals operations but rather its chemicals division with the purchase of the USA’s Sigma-Aldrich.

The German group is paying $140 per share, representing a 37% premium on Sigma-Aldrich’s share price on September 19, saying it will establish “one of the leading players in the $130 billion global life science industry”. The combined company will have “a highly attractive set of established brands and an efficient supply chain that can support the delivery of more than 300,000 products”.

In the laboratory and acadaemia business, Merck’s Millipore unit and Sigma-Aldrich will offer their customers “a complementary range of products across laboratory chemicals, biologics and reagents”. As for pharma and biopharma clients, they say they cover “the entire value chain of drug production and validation”.

Based on 2013 financials, the business would have had combined sales of 4.7 billion euros and earnings before interest, taxes, depreciation and amortisation before one-time items of 1.5 billion euros. Merck expects annual synergies of 260 million euros within three years after closing.

Merck chairman Karl-Ludwig Kley said the transaction “marks a milestone on our transformation journey aimed at turning our three businesses into sustainable growth platforms”. He said the deal is “a quantum leap”, saying the two companies “have found each other to present a much broader product offering”.

The Sigma-Aldrich purchase was announced just days after the company’s Merck Serono unit said it was in advanced talks with major oncology players over partnering an anti-PD-L1 compound and plans to expand its biosimilars operations.