PHARMACEUTICAL GIANT Merck yesterday announced an agreed $41 billion takeover of its New Jersey rival, Schering-Plough, in the second major deal in the global pharmaceuticals industry within six weeks.
The deal, which will create one of the world’s biggest drugmakers with combined sales of nearly $50 billion, will be done via a complex reverse takeover in which the much smaller Schering-Plough will technically acquire Merck.
The deal was designed this way partly because a Merck takeover would have triggered a contract that would have required Schering-Plough to give up its rights to the lucrative immunological drug Remicade to its partner Johnson Johnson.
Johnson Johnson said yesterday that it had no comment on whether it would try to take full control of Remicade as a result of the deal. Merck played down the risk of a dispute but said that any conflict would be resolved through a binding arbitration. The transaction, which follows rivals’ interest in Schering-Plough, including from Johnson Johnson, helped lift the markets, with Bristol-Myers Squibb’s shares rising more than 4 per cent as one of several other possible targets for an acquisition.
The deal between the drugmakers comes amid a harsher climate for pharmaceutical com-panies, as they have failed to produce enough new drugs to replace old ones, and as the new Obama administration prepares healthcare reforms that could pressure drug prices.
Merck said its acquisition would double the number of late-stage drugs in development to 18, and through annual cost cuts of $3.5 billion by 2012 prove “significantly accretive” to earnings per share, with positive effects after the first year of the takeover. Both companies have a significant presence in Ireland and, between them, employ just under 2,000 people.
Merck has an extensive operating at Ballydine in Tipperary, where it is the worldwide manufacturer of the company’s HIV drug Isentress. It also has offices in Dublin and, in November 2007, announced plans for the €200 million investment in a new human vaccines operation in Carlow that is expected to add 170 jobs to its Irish workforce of just under 500 when completed. Schering-Plough employs close to 1,400 people at plants in Bray and Rathdrum in Co Wicklow and at Brinny in Cork.
Richard Clark, Merck’s president and chief executive, said: “Together we will create a global health care leader distinguished by research and development excellence. This [deal] ensures that we will continue to be at the forefront of drug discovery and development for years to come.”
Schering-Plough shareholders will receive 0.5767 of a Merck share and $10.50 in cash for each share in a deal which values the US company’s equity at $41.1 billion, or $23.61 a share. Merck shares were down 8 per cent in mid-afternoon New York trading while Schering-Plough shares were up 16 per cent at $20.44. – (Financial Times service)
