CHEMICAL & ENGINEERING
NEWS OF THE WEEK MARCH 20. 2006 - EDITED BY WILLIAM 6. SCHULZ & STEPHEN TRZASKA
EUROPEAN
PHARMA
nies' pharmaceutical operations, Rômer confirmed that chemicals would remain a core business in the combined firm. "We will remain a chemicals and pharmaceuticals business," he said at the conference. "This is our strategy and what we will stick to." At the press conference, Rômer and his executive team said it was too early to say how Merck would growth," he told a hastily assem- achieve targeted cost savings of 8% of the combined company's cost bled press conference on Monday, base. "We don't want to reduce March 13. employment, we want to reduce In terms of sales, Merck and structures; that's where we expect Schering are at the small end of synergies," Rômer said. Merck the global pharmaceutical busihas indicated, however, that up ness—smaller, in fact, than Merck to 4,500 jobs—fewer than initial & Co. and Schering-Plough, the U.S. companies that before World speculation hadfigured—couldbe War I were the German firms're- lost, mostly outside Germany Rômer also emphasized that spective subsidiaries. Combined, the proposed deal had no connecthough, the company would have tion with the November firing of been the 13th largest Western Merck CEO Bernhard Scheuble. drugmaker in 2 0 0 5 (see page "This is a new project, uncon26). nected with that." He added that the Merck family, which PROPOSED PLAYER is Merck's majority shareholder, Prescription drugs would make intends to invest $1.2 billion in up half of combined company the company to support the cash bid. Consumer Prescription healthcare. drugs The bid is certainly at an at3% ^ n ^ ^ 50% tractive price, concedes analyst Diagnostic ^ X \ ^ ^ ^ Andreas Schmidt at Merrill Lynch. But in his view, there is little overlap in business areas, Generic ~ - ~ ^ ^ ^ H ^ ^ ^ H and the operational concept "does not look at all convincChemicals ing for long-term Schering in18% vestors." Merck expects some Pro forma 2005 sales > $13.9 billion $622 million in annual cost SOURCE: Merck estimates savings, "but we can't see such high synergies," he says. Schering's challenge now will be The two companies' combined to secure a similar or even higher prescription pharmaceuticals busioffer from a company that has a nesses, for example, would have better operational fit, Schmidt shown 2005 sales of $70 billion, says. Merck's timetable sees the buttressed by a combined R&D budget of $1.6 billion, with 30 proj- deal being wrapped up in midMay. That will allow enough time ects in clinical development. for a white knight to emerge or Although much of the press for Merck to raise its price.—PAconference examined the proposed TRICIA SHORT deal's impact on the two compa-
MERCK BIDS TO TAKE OVERSCHERING Merger of firms would create company with annual sales of nearly $14 billion
G
ERMANY'S MERCK KGAA HAS
launched a takeover bid for compatriot drug company Schering AG. The deal, which would be in cash, values Schering at $16.2 billion and would create a company with combined annual sales of more than $13.9 billion, based on 2005 results. Schering's executive team has rejected the takeover bid, saying it significantly undervalues the company. At roughly $96 per share, the offer is a third above Scheringfs average stock price over the past three months and 15% above the price on the day before the bid was announced. It is also 10% higher than the per-share breakup value that securities analysts at Dresdner Kleinwort Benson calculated in an advisory note earlier this month. A breakup or sale was likely far from the mind of Schering Chairman Hubertus Erlen when he reported the company's 2005 results last month. Erlen called for growth beyond 2006 and profitability improvement through pruning the portfolio, opening up new growth areas, and increasing efficiency and profitability. But Merck's chairman, Michael Rômer, is convinced that the deal builds on the complementary strengths ofboth companies. 'We believe that by combining our businesses we can create a more competitive global platform for further sustainable and profitable
WWW.CEN-0NLINE.ORG
'Tat9 J ^ A
'WewiUremam a chemicals and pharmaceuticals business. This is our strategy and what we will stick to!9 Michael Rômer, Merck's chairman
C & E N / MARCH 2 0 , 2006
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