FRANKFURT (Reuters) - Germany’s Merck KGaA sealed a $6.5 billion takeover deal with Versum Materials after overturning a deal it had agreed with rival bidder Entegris.

FILE PHOTO: A logo of drugs and chemicals group Merck KGaA is pictured in Darmstadt, Germany January 28, 2016. REUTERS/Ralph Orlowski/File Photo

A bet on a recovery in electronic materials markets for semiconductor makers, the transaction will boost the share of profit that diversified Merck derives from high-tech chemicals to 27 percent from 19 percent previously.

Merck, also maker of pharmaceuticals and biotech production gear, this week won the backing of Versum’s board for its $53-per-share offer, lifted from $48 previously, having been spurned for weeks.

“The business combination is expected to significantly strengthen Merck’s Performance Materials business sector, creating a leading electronic materials player focused on the semiconductor and display industries,” it said in a statement.

Merck’s swoop comes amid depressed stock prices in the volatile semiconductor industry after demand for mobile devices slowed and prices for memory chips sank.

But Merck said here on Friday it would capitalize on global data processing and storage demand mushrooming by more than 30 percent per year until 2025, fueled by trends such as artificial intelligence and autonomous driving.

Versum is the former specialty chemicals division of industrial gases group Air Products.

Merck, whose shares were down 2.5 percent at 1400 GMT is targeting 75 million euros ($85 million) in annual synergies by the third full year after closing of the deal, which it expects in the second half of 2019, it said in a statement on Friday.

The deal will increase earnings per share in the third full year after closing, while the increase will be immediate when adjusted for one-off items, it added.

The purchase will be financed with existing cash as well as a $4 billion bridge loan and a $2.3 billion term loan provided by Bank of America Merrill Lynch, BNP Paribas Fortis and Deutsche Bank.

Merck aims to preserve a strong investment grade credit rating, it said.

Guggenheim and Goldman Sachs are financial advisors, and Sullivan & Cromwell LLP is acting as legal counsel to Merck. Lazard and Citi are serving as financial advisors to Versum, with and Simpson Thacher & Bartlett LLP as legal counsel.

Entegris this week stepped back from the contest, saying it would not improve the terms of the all-share merger signed in January, which would have seen Versum investors receive about $44 worth of Entegris stock for each Versum share.

Versum had to pay Entegris a $140 million termination fee.