Merck has entered into an agreement to sell its global Surface Solutions business unit to Global New Material International Holdings (GNMI) for EUR 665 million.

Merck plans to divest its Surface Solutions business unit. Source: European Coatings

The proceeds from this sale will be directed towards strengthening core strategic areas. The Surface Solutions unit specialises in providing pigment solutions for coatings, industrial, and cosmetic applications, generating EUR£¿411 million in sales in 2023. As part of the transaction, around 1,200 employees will be transferred to GNMI, with approximately 700 of them based in Germany. Merck has been preparing for some time to divest its pigment business. In 2022, the company spun off the division and initiated the first steps toward its sale, receiving three final offers last June, reports the German magazine business ¡°Handelsblatt¡±. Among those three was the offer by GMNI. GNMI, which operates under the brand name Chesir, is a producer of pearlescent pigments. Established in 2011, the company has facilities in China and Korea, employs roughly 800 people and is listed on the Hong Kong Stock Exchange.

¡°The divestiture of the Surface Solutions business unit will further sharpen our focus on high-tech applications in electronics, such as driving the development of next-generation chips as an integrated solutions provider for our semiconductor customers,¡± said Bel¨¦n Garijo, Chair of the Executive Board and CEO of Merck. ¡°The decision to divest Surface Solutions was driven by the need for consolidation in a highly competitive market¡±, explains Jeff White, Head of Surface Solutions. ¡°Without Surface Solutions, the sector will be a pure-play in Electronics in the future.¡±

Structuring the transition

To ensure a smooth transition, an integration team with representatives from both Merck and GNMI will be set up. GNMI plans to establish three regional headquarters for Surface Solutions ¨C in Germany, the United States, and Asia ¨C while continuing to operate existing production sites in Gernsheim, Germany; Onahama, Japan; and Savannah, Georgia, USA.

Merck will retain ownership of the Gernsheim property, leasing it to GNMI under a long-term agreement, with a clear plan to separate the area utilised by Surface Solutions. The nearby GreenTech Park Fluxum in Gernsheim will not be impacted by this sale. The French division of Surface Solutions is not included in the initial sale; however, GNMI has made an binding offer to acquire the relevant shares and assets once Merck completes the required consultations with the relevant works council representative. The transaction, pending regulatory approvals and other customary closing conditions, is anticipated to be finalised in 2025.

A look at the Pigments Market

The pigment market is under pressure due to high energy costs, stricter regulations, and geopolitical tensions disrupting supply chains. While market research forecasts moderate growth, several industry players remain more pessimistic, especially in Europe, where demand is stagnant. Key sectors, such as construction, are currently weakening, and high costs, along with regulations create uncertainty. Despite these challenges, there are opportunities, particularly in the Asia-Pacific region, and sustainability remains a central focus for the industry.