Merck buys Schering-Plough in $41.1b cash-&-stock deal

NEW DELHI: US-based Merck & Co on Monday said it is acquiring Schering-Plough for $41.1 billion in a cash-and-stock deal, to create a $47 billion drug major. The deal comes just six weeks after Pfizer Inc gobbled rival firm Wyeth for a record $68 billion.
Schering-Plough shareholders will get 0.57 shares of Merck and $10.50 in cash for each share they own. This values Schering-Plough at $23.61 a share, a 34% premium to Friday���s closing price. Merck shareholders would own 68% of the combined company, a Merck release said.

Here in India, the impact of the deal will be limited. ���Both companies are relatively insignificant players individually in India,��� said ChrysCapital MD and sector expert Sanjiv Kaul. The Merck MSD-Fulford India (Schering-Plough owns 54% of Fulford) combine will have annual sales revenue of Rs 200-250 crore in sales and it will be ranked among the top 50 companies in India with a combined work force of 1,200 employees.

Fulford is a listed company and it is possible that Merck MSD may have to make an open offer to the former���s shareholders. When contacted, the spokeswoman for Merck���s Indian operations said: ���At this time, it is premature to discuss any specific plans with respect to the local market.���

Some pharma analysts believe that an open offer is not mandatory. ���Both Merck and Schering Plough are US-based companies. The transaction does not involve acquisition of any Indian company and hence may not trigger an open offer,��� says brokerage firm Prabhudas Lilladher���s head of research Ranjit Kapadia.

The product range of Merck India and Fulford do not overlap. Merck MSD���s current market range in India covers its cardiovascular, vaccines, metabolics and critical care segments, while Fulford has strong presence in the dermatology segment. Fulford clocked sales of Rs 187 crore in 2008. Merck MSD���s sales figures in India are not available as it���s not listed. The firm had launched operations in India in 2005 and pharma analysts say its Inian revenues are less than Rs 50 crore.

The global deal did not surprise analysts as the international pharma industry is facing stiff challenges due to dwindling research pipelines and patent expiry of top-selling drugs in the next few years. This, incidentally, is the first big ticket acquisition for New Jersey-based Merck which has always grown on the strength of its new drugs. ���In the recent past, there has been increased consolidation among original research companies. In the end, industry will be left with a few big players,��� said Mr Kaul.
Merck chairman and CEO Richard T Clark said, ���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 highgrowth emerging markets.���

The combined entity will have 18 molecules in the late stage development phase and diversify its products cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology and women���s health.