Merck's Hostile Bid For Schering Could Trigger Bitter Takeover Battle

Merck KGaA launched a 15-billion-euro (US$18 billion) hostile takeover bid for Berlin-based rival Schering on March 13 in a move that analysts said could trigger a bitter bidding war. Nevertheless, analysts were skeptical whether the move really made sense, given the disparate areas of activity of both groups.

Merck, the world's oldest pharmaceuticals firm, said it was offering 77.0 euros per share or 14.6 billion euros overall to buy Schering, a world leader in contraceptives and fertility drugs, in a bid to become one of the leading drug makers in Europe. But Berlin-based Schering promptly turned down the advances of the venerable 338-year-old family-run Merck, saying the offer price "significantly undervalues" its business.

Merck, which already holds 4.98% stake in Schering, insisted that its offer was "attractive", representing a premium of 35% over the average price of Schering shares in the last three months. However, investors appeared to believe that the price could be pushed higher in a bidding war.

Merck chairman Michael Roemer said that a tie-up with Schering would create the necessary critical mass to compete and thrive in the consolidating global pharmaceuticals industry. A combined company would have annual sales of 11.2 billion euros, a research and development budget of 1.3 billion euros, more than 30 drugs in the development pipeline and the increased sales reach to launch those products on the all-important markets of the U.S.and Japan.

Although Schering and Merck are of a similar size, Merck makes most of its money from liquid crystals and specialty chemicals, even if it also makes generic drugs and cancer treatments such as its best-selling Erbitux drug. By contrast, Schering, aside from being a world leader in fertility drugs, makes the top-selling multiple sclerosis drug Betaferon.

The combined group would be one of the biggest pharmaceuticals companies in Germany and would rank number 14 in the world.

Copyright Agence France-Presse, 2006

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish