Germany's Merck KGaA on Sunday said it agreed to buy U.S. biotech tool maker Millipore for around $6 billion in cash, as the company looks to build its lab equipment business.

Merck, the world's largest maker of chemicals for flat-panel displays, said late on Sunday it agreed to acquire Millipore for $107 per share in cash, valuing the deal at around $7.2 billion including net debt.

The deal snatches Millipore away from rival bidder Thermo Fischer Scientific. A source familiar with the situation told Reuters on Feb. 22 that Thermo Fisher offered to buy Millipore for $6 billion, but the exact terms of that bid were unknown.

Merck's bid represents a 13% premium over Friday's closing price for Millipore shares, which had already been boosted by recent takeover speculation.

In a statement, Merck said the tie-up would create a supplier of equipment and substances for research to the life science sector with €2.1 billion in annual sales. Millipore, which makes filters and purifiers for laboratory water and other materials used in making biotechnology drugs, had revenue of €1.21 billion last year.

Merck said the deal will create about $100 million of annual cost savings, which it expects to reach within three years of closing. Merck said it expects the transaction to clear regulatory review and be completed in the second half of 2010.

Family-controlled Merck, which traces its roots to a 17th century pharmacy, has been a smaller player in the biotech-research equipment market. It relies heavily on liquid crystals, the key chemicals for TV flat screens, and on multiple sclerosis drug Rebif and cancer drug Erbitux for earnings.

In 2006, it was trumped by national rival Bayer in a takeover battle over German contraceptives specialist Schering, but the following year it acquired Swiss biotech company Serono for €10.3 billion.

To finance the Millipore deal, Merck will use cash it holds on its balance sheet and will take out bridge loans, which at a later stage will be replaced by a bond issue, a spokeswoman said.

Millipore had confirmed on Tuesday it was evaluating strategic alternatives, including a merger or sale of the company.