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The Performance Materials division comprises Merck’s entire specialty chemicals business. It offers high-tech performance chemicals for applications in fields such as consumer electronics, lighting, coatings, printing technology, plastics, and cosmetics. Through the acquisition of AZ Electronic Materials (AZ), a leading supplier of high-tech materials for the electronics industry, the division was significantly strengthened in the highly differentiated premium segment of high-tech materials and functional specialty chemicals. The acquisition officially closed on May 2, 2014. On June 27, 2014, Merck exercised its compulsory acquisition right (“squeeze-out”) and all remaining outstanding shares were transferred to Merck on July 2, 2014. In December 2013, Merck had made a cash offer to AZ shareholders of 403.5 GB pence per AZ share, totaling approximately € 1.9 billion.
The Performance Materials division’s share of Group sales increased in the second quarter of 2014 to 18% and its share of EBITDA pre one-time items (excluding Corporate and Other) rose to 25%. The results of AZ have been included since May 2, 2014. After the combination with AZ, the EBITDA margin pre one-time items amounted to 44.8% of sales in the second quarter.
Performance Materials comprises four business units: Liquid Crystals, Pigments & Cosmetics, Advanced Technologies, and AZ. Liquid Crystals generates more than half of divisional sales. With a high market share, Merck has established itself as the global market and technology leader in liquid crystal mixtures. The market is highly consolidated. In addition, high barriers to market entry exist due to the technological complexity of liquid crystals and the high quality requirements of customers and consumers. The seven largest LCD display manufacturers are among the customers of the Liquid Crystals business. Performance Materials has the broadest product offering in the industry and offers, among other things, liquid crystals based on PS-VA and IPS technologies. This enables the division to meet individual customer needs and offer solutions for all display sizes, from smartphones and tablet computers, to large-area television screens.
With the full acquisition of Peer+, a Dutch startup company for smart window technology as of July 1, 2014, Merck is also further advancing the future-oriented technology for liquid crystal smart windows. The division also manufactures and markets materials for organic light-emitting diodes (OLEDs), which are used in innovative lighting applications and display technologies.
The Pigments & Cosmetics business unit develops and markets a comprehensive product portfolio of effect pigments and functional materials. The pigments are primarily processed into automotive and industrial coatings, plastics, printing materials, laser marking, cosmetics, and counterfeit prevention applications. The product portfolio also includes high-quality cosmetic actives used, for example, in skin care products, sunscreens, and insect repellents.
By providing innovative research and development, the Advanced Technologies business unit bolsters the growth and sustainable competitiveness of the Performance Materials division.
In the integration phase, AZ will also operate as an independent business unit within the Performance Materials division until a decision has been made concerning its final structure. Merck has already begun with the integration of AZ and its global workforce of around 1,150 employees. With annual sales of around US$ 730 million in 2013, AZ is a leading supplier of high-tech materials with a production focus in Asia, where the company achieves nearly 80% of its sales. AZ generated more than three-quarters of its sales with products that are the leaders in their respective markets. Products from AZ are essential components of integrated circuits, flat-panel displays and light-emitting diodes. AZ is thus a key partner to leading global manufacturers of electronics since the chemical technologies AZ provides enable them to improve existing processes and to develop innovative new products.
