Merck, Schering-Plough Plan $41.1B Merger

Drugmakers, Already Partners In Joint Venture, Want To Combine Under Merck's Name

(AP)  Merck & Co. is buying Schering-Plough Corp. for $41.1 billion in stock and cash in a deal that gives the companies more firepower to compete in a drug industry facing slumping sales, tough generic competition and intense cost pressures.

The deal announced Monday would unite the maker of asthma drug Singulair with the maker of allergy medicine Nasonex. Merck and Schering are already partners in a pair of popular cholesterol fighters, Vytorin and Zetia.

The latest combination comes only a few weeks after Pfizer Inc. announced it has agreed to pay $68 billion for Wyeth.

Big companies across the pharmaceutical industry are facing slumping sales as the blockbuster drugs of the 1990s lose patent protection, increased pressure to hold down prices and a dearth of major new drugs coming on the market.

Merck and Schering Plough along with most of their rivals are currently eliminating thousands of jobs and restructuring operations to further cuts costs.

Schering-Plough's shareholders will get $10.50 in cash and 0.5767 Merck shares for each Schering-Plough share they own. That's a 34 percent premium to Schering-Plough's closing stock price on Friday.

The two New Jersey pharmaceutical companies said that Merck's top executive, Chairman and CEO Richard Clark, will lead the combined company, which will be a dominant player in treatment areas including cholesterol, respiratory, infectious disease and women's drugs, as well as vaccines.

The two companies had a combined $47 billion in revenues in 2008.

Schering also makes the biotech arthritis drug Remicade, plus a host of popular consumer products such as the Coppertone suntan line and Dr. Scholl's foot products.

The transaction is to be structured as a reverse merger. As a result, Schering-Plough will be the surviving corporation but will be take the name Merck. The new company will stay at Merck's headquarters in Whitehouse Station, N.J., but said that the "substantial majority" of employees of Kenilworth, N.J.-based Schering-Plough will remain with the combined company.

Schering-Plough's CEO, Fred Hassan, will participate in planning integration of the two companies until the close of the deal, which is expected in the fourth quarter.

Merck's sales were down 3 percent in the fourth quarter, at $6 billion, while Schering-Plough's were up 17 percent to $4.35 billion, mainly because of Organon's products.

The companies said this will improve their finances, giving them annual cost savings of about $3.5 billion each year after 2011, and will boost earnings per share in the first full year after the deal closes.

Merck has about 55,200 employees and Schering-Plough, which grew significantly with its November 2007 acquisition of Dutch biopharmaceutical company Organon BioSciences NV, has about 55,200 employees.

"There'll be no immediate changes" to staffing levels, Merck spokeswoman Amy Rose told The Associated Press. "Eventually, we anticipate an approximate 15 percent reduction in the combined company's headcount."

"There's a variety of reasons," for the reverse merger, Rose said. She said the specifics would be discussed during a conference call.

[saturn05]

Is everything in our country going to be owned by one or two companies? Monopolies are extremely bad for society. Prices will climb due to no competitors. We have seen this with Comcast in our area. There is no other cable company in town and Comcast raises their rates just about every six months. They know they can and they do. But it scares me when it in pharmaseutical companies; banking; car manufaturers; media and so on. This cannot be good for America.

[omega39-2009]

What a great plan in a jobless economy, let's allow job destroying mergers. The two CEO's will as usual be the only real winners here.

[afmcalax]

I would not allow any mergers until the societal cost is factored into the equation. We are now suffering through the economic collapse caused by so many mergers that brought nothing positive to the economy or society. It enriches the executives and the Wall Street money managers, but leaves nothing for the American citizen. Name mergers that actually helped society or actually produced the fictitious results that the money changers promised? It just creates a monopoly that tries to manipulate the market further.

Will this make prescriptions cheaper? Will it decrease the rate of increase for prescription medicine? Or will this just make 2 companies even larger so they can manipulate the market further and then become "too big to fail"? Beware of merger mania !!!

[grabandgo]

These mergers shouldn't be allowed. This is discouraging trade and competition. It allows these companies to overcharge people with no fear of someone offering lower prices. What happened to the Sherman Anti Trust laws?