Merck KGaA eyes up Schering
Merck KGaA, of Darmstadt, Germany, has announced its intention to mount a Euro 14.6bn takeover of Berlin-based Schering AG, or €77 cash per Schering share. This represents a '35% premium to the three-month average unaffected share price and a 24% increase on the unaffected share price", according to Merck.
"This is an ideal combination for both companies," said Michael Roemer, chairman of the executive board of Merck. "We want to build on the complementary strengths of both companies and we believe that by combining our businesses we can create a more competitive global platform for further sustainable and profitable growth, through stronger resources and focus on r&d, through a larger and more balanced portfolio in key therapeutic areas and through increased geographic reach.
"We have informed Schering of our intention and hope the management and supervisory board will recommend that the shareholders accept our offer."
However, the executive board of Schering has said that Merck's approach is unsolicited and that its offer "significantly undervalues Schering and its prospects as an independent specialised pharmaceutical company". It added that "no negotiations are ongoing with Merck."
Merck hopes that by combining the two companies it can create "a world-class pharmaceuticals and chemicals company with combined pro-forma annual revenues of €11.2bn".
It has expressed particular interest in Schering's gynaecology and andrology franchise, including the world's top-selling birth control pill Yasmin, which it believes could provide the proposed combined pharma business with "consistent revenue growth and new product launches"; and Betaferon, Schering's multiple sclerosis product, which Merck sees as the potential hub - along with Sarizotan, its own Phase III Parkinson's product - of a central nervous system franchise.
The Darmstadt company also sees Schering's oncology franchise as "very complementary" to its own, and thus envisions oncology as "the future growth-driver" of the proposed combined pharma business, with "significant near-term growth" driven by its own Erbitux.
Merck, which achieved worldwide sales of €5.9bn in 2005, says that its offer will be initially funded through its existing cash and bridge financing facilities provided by Bear Stearns, Deutsche Bank and Goldman Sachs, while the total cash consideration of €14.6bn will be refinanced through a combination of existing Merck funds, debt and equity.