Merck, Schering-Plough Announce Merger

Deal valued at $41 billion

U.S. pharmaceutical giants Merck and Schering-Plough announced their merger early on March 9 in a stock-and-cash transaction valued at $41.1 billion. The combined company will bear the name Merck.

When the transaction is complete, Merck shareholders are expected to own approximately 68% of the combined company and Schering-Plough shareholders 32%. The merger will be financed with a combination of $9.8 billion from existing cash balances and a $8.5 billion loan by investment bank J.P. Morgan.

Last year's combined revenue of the two companies totaled $47 billion. The merged entity is expected to have a cash and investments balance of approximately $8 billion. Merck expects to achieve cost savings of approximately $3.5 billion annually beyond 2011 as a result of the transaction.

"The combined company will benefit from a formidable research and development pipeline, a significantly broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets," said Merck chairman Richard Clark. He added that the merger will allow the new enterprise to invest in strategic opportunities and create "meaningful value" for shareholders.

Fred Hassan, CEO Schering-Plough, said the corporation was joining forces with Merck, its long-term partner in a cholesterol-fighting joint venture, to create a new leader in the pharmaceutical industry. "By harnessing the strengths of both companies, the combined entity will be well-positioned to further deliver on our shared goal of discovering new therapies for patients to help them live healthier, happier lives," Hassan pointed out.

The transaction will double the number of potential medicines Merck has in the most advanced phase of development, bringing the total to 18. Officials said the combined company will have a more diverse portfolio across important therapeutic areas, including cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology, women's health and other areas.

Schering-Plough generates about 70% of its revenue outside of the U.S., including more than two billion dollars in annual revenue from emerging markets. As a result, the merger will dramatically accelerate Merck's own international growth efforts, including the company's goal of reaching top five market share in targeted emerging markets, company officials said. They pointed out that the combined company will have a more geographically diverse mix of business and is expected to generate more than 50% of its revenue outside the United States.

Copyright Agence France-Presse, 2009

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